We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms.
Homebuyers stuck on the sidelines waiting for mortgage interest rates to fall (or home prices to level off) may not have to wait much longer. With a combined cooling inflation rate and concerning unemployment figures, the Federal Reserve is now poised to issue its first cut to the federal funds rate since 2020. And some economists think it could be a substantial reduction.
While the Fed doesn't directly dictate what lenders offer borrowers, it goes a long way toward influencing their rates, as homebuyers contending with the highest mortgage interest rates in decades can attest. But a reduction in the federal funds rate after the next Fed meeting on September 18 – and the potential for additional cuts when the Fed meets in November and December – may have some buyers wondering if now is the time to act. And that decision-making will largely depend on what they can afford to pay.
While it's easy to calculate what a $500,000 mortgage will cost per month now, it's the savings on the horizon that many may want to determine before getting started. To that end, below we'll calculate exactly how much a $500,000 mortgage could cost per month after rates are cut.
See how low of a mortgage interest rate you could secure here today .
How much would a $500,000 mortgage cost per month after rates are cut?
Before trying to determine what a $500,000 mortgage would cost once rates are cut, it helps to first know what it would be if a borrower took out a loan at today's rates. Here's what that would look like for qualified borrowers using today's averages, accounting for the conventional 20% down payment ($100,000) and excluding homeowners insurance and taxes:
- 15-year mortgage at 5.86%: $3,345.25 per month
- 30-year mortgage at 6.44% : $2,512.51 per month
While those rates may not seem like a bargain, particularly when compared to the record-low rates available in recent years, they're still a major improvement when compared to what was available in December 2023:
- 15-year mortgage at 6.42%: $3,466.86 per month
- 30-year mortgage at 7.09%: $2,685.43 per month
So not only are rates more than half a percentage point lower now, but you'd save more than $120 with either option by acting today versus last year. But how much will a $500,000 mortgage cost per month after rates are cut? While mortgage interest rates won't fall directly in tandem with the Fed, they do closely align with that benchmark. So here's what you could expect to pay with a 25 basis point reduction (which is widely expected to be issued later this month):
- 15-year mortgage at 5.61%: $3,291.73 per month
- 30-year mortgage at 6.19% : $2,447.28 per month
And here's what a $500,000 mortgage loan would cost monthly if today's average rates are cut by half of a percentage point:
- 15-year mortgage at 5.36%: $3,238.69 per month
- 30-year mortgage at 5.94% : $2,382.79 per month
So, in short, not only are homebuyers preparing for a $500,000 mortgage loan in a better position now than they were for most of 2023, but they're also positioned to secure an even lower rate if they wind up closing on a home later in 2024 or into 2025. For many buyers, then, now may be a smart time to buy before competition rises and home prices tick up again.
See what mortgage interest rate you're eligible for here now .
The bottom line
The mortgage rates and monthly payments of 2020 and 2021 are long gone – and they don't appear to be returning anytime soon. But that doesn't mean that homebuyers still can't secure a manageable monthly mortgage payment now, particularly if they purchase a home for $500,000 or less . So watch mortgage rates daily , boost your credit score as high as possible and start calculating all of your potential costs because this fall could be the time to enter the market.