Example scenario
Loan amount – 500K, loan period – 20 yrs
Interest rate original / hike – 1% / 5%
Monthly payment original / increase – 2.3K / 3.3K
That is a 30 percent increase in monthly loan payments for a 4 percent rate increase.
Why?
Calculated using online calculator
In: 0
Depends where you’re located. In the US, the vast majority of mortgages are fixed rate 15 or 30 year loans, so existing loans aren’t impacted by rate increases.
But, yes 4% increase in interest rate could cause a 50% payment increase because the way loans are amortized, that 4% is applied per year to the remaining balance for the remaining years.
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