How Much Interest Will I Pay on a $200,000 Mortgage?

by Maurie Backman | Published on Sept. 28, 2021

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A woman sits at home, looking over her personal finances.

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Many homeowners are surprised to learn how much money they actually spend on interest.

Mortgage lenders need to make money in the course of giving out home loans, and they do so by charging borrowers interest. In fact, every month, when you make a mortgage payment, a portion of that payment goes toward paying down your loan's principal, while a portion goes toward interest.

But you may be surprised at just how much money you end up spending on interest in the course of paying off your home. In fact, here's what you could end up spending on a $200,000 mortgage.

What will you spend on mortgage interest?

The amount of money you end up spending on mortgage interest will depend on a number of factors:

  • The amount of your mortgage
  • The interest rate you snag on your loan, which will hinge heavily on your credit score
  • The amount of money you put down on your home
  • The length of your loan

Now, let's say you take out a $200,000 mortgage on a $250,000 home so that you've made a 20% down payment on that property. Here's the amount of money you could end up spending on interest in the course of your repayment period:

Length of Repayment Period Credit Score Total Interest
30 years Great $107,295
30 years Fair $147,568
20 years Great $60,761
20 years Fair $85,036
15 years Great $37,746
15 years Fair $54,890

Keep in mind that the above figures are based on average mortgage rates today, which can change over time. Also, if you have a great credit score for a mortgage (one in the mid- to upper-700s), you might easily snag an interest rate that's 1% lower than what someone with fair credit will qualify for.

So what can we learn from these numbers? The main takeaway is that the higher your credit score and the shorter your loan term, the lower an interest rate you're likely to have -- and the less interest you're likely to pay on your mortgage all-in.

In fact, if you have great credit, based on our example, paying off your home in 15 years versus 30 could save you $69,549 in interest throughout your repayment period. That's a lot of money.

If your credit score could use some work, you can boost it by:

How to pay less interest on an existing loan

If you already have a mortgage, there's an easy way for you to lower its interest rate and save yourself money in the course of paying it off -- refinancing. When you refinance, you swap your existing home loan for a new one.

Refinancing generally makes sense when you can shave at least 1% off of your loan's interest rate. And the higher your credit score, the more likely you'll be to qualify for a competitive refinance rate.

Many homeowners are shocked to see just how much mortgage interest costs them over time. If you want to pay as little of it as possible, make a decent-sized down payment on your home (ideally, at least 20%), take out a loan with as short a term as possible, and make an effort to boost your credit score. Doing so could really save you a bundle.

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