How much will a $450,000 mortgage cost monthly once rates are cut?
It's been more than four years since the Federal Reserve issued a cut to the federal funds rate. But that drought will soon end when the Fed meets again next week. With inflation cooling and concerns over the unemployment rate growing, the Fed is poised to cut the rate from the current range between 5.25% and 5.50% by 25 basis points and perhaps even half a percentage point.
And that means homebuyers will finally be in for some relief. Contending with the highest mortgage interest rates in decades, buyers have seen a steady drop since the end of 2023. With a formal cut from the Fed this month, then, rates could fall even further. Buyers should be carefully monitoring mortgage rates daily against this backdrop. And they should be calculating their potential costs at today's current rates and what they may be once rates are cut.
With the average home price around $427,000 right now, buyers would be well served by rounding up and calculating the costs of a $450,000 mortgage loan. Below, we'll break down exactly what a payment of principal and interest costs now and what it may look like once rate cuts are issued.
See how low of a mortgage interest rate you could secure here today.
How much will a $450,000 mortgage cost monthly once rates are cut?
While every buyer's monthly mortgage payment will differ once homeowners insurance and taxes are added, it's helpful to determine what the principal and interest would cost, as that figure will remain the same for each qualified borrower. Here's what it would cost monthly at today's mortgage rates, assuming the conventional 20% down payment is applied ($90,000):
- 15-year mortgage at 5.78%: $2,995.26 per month
- 30-year mortgage at 6.41%: $2,254.18 per month
Mortgage interest rates won't fall by the same increment that the federal funds rate does, however. And some lenders may have already priced in expected rate cuts in their current offers to borrowers. That noted, here's what buyers can expect to pay for a $450,000 mortgage per month if rates fall by 25 basis points:
- 15-year mortgage at 5.53%: $2,947.23 per month
- 30-year mortgage at 6.16%: $2,195.55 per month
And here's what to expect if today's rates are cut by half a percentage point, either in the September Fed meeting or cumulatively when combined with a cut at the November meeting:
- 15-year mortgage at 5.28%: $2,899.64 per month
- 30-year mortgage at 5.91%: $2,137.60 per month
So while a $450,000 mortgage comes with moderate monthly payments now, buyers could save close to $95 per month with a 15-year loan and around $116 monthly with a 30-year loan should rates be cut as expected. But because rates won't move directly as the Fed does, borrowers should expect these numbers to be dynamic – and consider acting before new buyers flood the lower rate environment.
Learn more about your current mortgage rate options here.
What about home prices?
A cooler rate climate leads to inevitable questions about home prices. Specifically, will they increase as more buyers compete for limited inventory? While no one knows for sure, home prices may rise in the months and years to come. And, depending on the market in which those prices increase, the savings you secure with a lower interest rate could easily be wiped out by paying more for a mortgage. So be sure to weigh this scenario carefully when considering whether it truly makes sense to wait to purchase a home.
The bottom line
A mortgage payment on a $450,000 loan could drop by more than $90 as interest rates are cut and by more than $100 for 30-year loans. But waiting for rates to cool will pose other challenges, including increased buyer competition and possibly significantly higher home prices. Start doing your research now, then, and begin calculating possible costs to best determine which approach makes sense for your unique financial situation.
