The Power of Lower Interest Rates
Even a small difference in interest rates can have a significant impact over time, transforming the total cost of your loan. This illustrates the importance of carefully evaluating rates to make informed decisions that align with your long-term financial goals.
Analyzing the Impact
At first glance, the difference between 6.35% (Option A) and 5.75% (Option B) might not seem groundbreaking. However, when you take a closer look at the numbers, the story changes dramatically. Over the life of a $380,000, 30-year fixed-rate mortgage:
The borrower with a 6.35% rate (Option A) pays $473,454.02 in interest over 30 years.
The borrower with a 5.75% rate (Option B) pays $418,327.67 in interest over 30 years.
That’s a savings of $55,126.35 in interest—enough to make a meaningful difference in most people’s financial futures. Even over shorter periods, the savings quickly add up:
After 1 year: $2,376.88
After 2 years: $4,756.87
After 3 years: $7,138.27
After 4 years: $9,519.15
After 5 years: $14,270.40
What If You Invest the Savings?
A lower interest rate not only helps you save money on your mortgage, but it also creates an opportunity to build wealth if you invest those monthly savings. By reinvesting the amount saved into the stock market with modest annual returns, the potential is even more significant:
At a 6% annual return, your savings could grow to $176,248.40 over 30 years.
At a 7% annual return, they could reach $217,554.45.
At an 8% annual return, the potential grows to $269,674.38.
While these numbers are based on generalized assumptions and market performance will vary, they highlight the powerful compounding effect of investing even modest savings over time.
Beyond the Numbers: The Bigger Picture
At Murray Mortgage Solutions, we believe a mortgage is more than just a loan, it’s a cornerstone of your financial strategy. Securing a lower rate isn’t just about saving money in the short term; it’s about creating opportunities to grow your financial future. Whether it’s paying off debt, building a college fund, or retiring comfortably, those savings can make a meaningful impact.
When you work with us, you’ll receive a transparent breakdown of how even minor rate differences can affect your finances, not just now, but over decades. Our goal is to ensure you're making the most informed decision possible, empowering you to align your mortgage with your long-term financial goals.
Disclaimer: This example is for illustrative purposes only and is not a rate advertisement or investment advice.