The true 30-year cost of a US mortgage at every rate from 3% to 8%

Mortgage payments are computed monthly. Mortgage costs accumulate annually. The gap between the two is where most homeowner intuition goes wrong: a difference of 1% APR sounds small per month and dramatic over the loan’s life. This piece works out, in dollars, exactly how dramatic. All numbers are deterministic and reproducible — plug them into any mortgage calculator and you’ll get the same results.

The setup

Same loan parameters across all scenarios:

• Principal: $400,000 (median US mortgage 2024).
• Term: 30 years (360 monthly payments).
• Type: Fixed-rate fully-amortising. No extra payments.
• Rate variation: 3%, 4%, 5%, 6%, 7%, 8%.

Formula used (standard amortisation):

monthly = P × r × (1+r)ⁿ / ((1+r)ⁿ − 1)
where r = annual_rate / 12 and n = 360

The headline numbers

At 8% APR, lifetime interest exceeds the principal itself by 64%. The borrower pays the bank more than the entire cost of the house in pure interest. At 3% APR, the interest is “only” half the principal.

Per-percentage-point cost

Each additional 1% on the rate adds substantial lifetime cost:

On a $400k loan, a single percentage point on the rate is worth roughly $80,000-100,000 over 30 years. This is the math that justifies shopping around — a 0.25% rate improvement on this loan is $20,000-25,000 in real money. Even small fees worth paying to get a better rate often pay back themselves many times over.

Where every dollar goes

At 7% APR (current 2026 conditions), the $958,036 total breaks down as:

• Principal: $400,000 (41.7%). What you actually borrowed.
• Interest: $558,036 (58.3%). The bank’s revenue.

Over the loan’s life, you pay more in interest than the house cost. Add property taxes (~30% cumulative at typical rates), insurance, maintenance (~30%), HOA, and the all-in 30-year cost of owning a $400k house at 7% APR runs north of $1.4 million in 2026 dollars.

The first-five-years problem

Amortisation is front-loaded with interest. At 7% APR, the first five years of payments break down as:

After 5 years and $160k in payments, only $23,254 of principal has been paid off. The bank received $136k in interest. Selling at year 5 returns essentially the down payment plus any home appreciation — none of the amortisation has built meaningful equity.

The 15-year comparison

For the same $400k principal at 7% APR (15-year mortgages typically price ~0.5-0.75% below 30-year, but holding rate constant for comparison):

The 15-year saves $310,915 in interest for a monthly payment 35% higher. For a household that can absorb the cash-flow difference, this is the highest risk-free return available to most US consumers — see our 15- vs 30-year comparison.

What this means in practice

1. Rate shopping has 5-figure stakes.A 0.25% improvement is worth $20-25k over the loan’s life. Half a day of phone calls to three lenders is well-spent time.
2. Lifetime interest is the right comparison number. Not monthly payment, not APR difference. Total dollars paid in interest is the only metric that captures the full cost.
3. Early-year extra principal pays back the most.An extra $1,000 paid against principal in year 1 of a 7% loan saves about $7,000 in interest over the loan’s life. The same $1,000 paid in year 25 saves only $300.
4. Refinancing has a real break-even. Use the same per-percentage-point math: a 0.5% rate drop is worth ~$45k over 30 years. Closing costs of $4-6k pay back fast if you stay in the loan.

Sources and reproducibility

Numbers in this piece are computed from the standard amortisation formula above using $400,000 principal and 360 months. Every result can be reproduced by feeding the same parameters into our mortgage calculator.

Median US mortgage size from the National Association of Realtors 2024 Existing Home Sales report. Reference for the amortisation formula: CFPB “What is a fully amortised loan?” (2024); standard textbook derivation in Brealey, Myers, & Allen, Principles of Corporate Finance (13th ed.), §3.