Since monthly payments 

spread the cost of a mort-

gage over a long period of 

time, it’s easy to forget the 

total expense. For exam-

ple, if you borrow $200,000 

for 30 years at 6% interest, 

your total repayment will 

be around $431,680, more 

than two and a half times 

the original loan.

What seems like  

minor differences in  

the interest rate can 

add up to a lot of 

money over 30 

years. At 7% 

the total repaid 

would be $479,160, 

about $47,480 more 

than at the 6% rate.

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LOAN AMOUNT 

(PRINCIPAL)

The amount you borrow. This is the 

amount plus interest that you must 

repay over the term of the loan.

INTEREST

Interest is the percentage of  

principal you pay to borrow. It’s  

the primary component of the APR, 

and is determined in large part by  

the current cost of borrowing in the 

economy and your creditworthiness.

POINTS  

(PREPAID INTEREST)

Interest that you prepay at the  

closing. Each point is 1% of the  

loan amount. For example, on a 

$90,000 loan with two points,  

you’d prepay $1,800.

FEES

Fees include application fees, loan 

origination fees, and other initial  

costs imposed by the lender.

THE COST  

OF YOUR HOME

TERM

(LENGTH OF  

THE LOAN)

The longer the term, 

the lower the monthly 

payments, but the 

more you’ll pay  

in total. 

RATE

Over time, a lower 

interest rate will have 

the greatest impact  

on overall cost.

The Cost of a Mortgage

The cost of a mortgage depends on the amount you borrow, 

the APR, and how long you take to repay.

Bottom line: Any  

of the factors will  

increase the overall  

cost, but a higher inter- 

est rate and longer  

term will have the 

greatest impact.

HOME FINANCE

HOME FINANCE

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