How much does a $500,000 mortgage cost monthly now that interest rates were cut?

Before you take out a mortgage loan, it's important to know what the monthly payments could be at today's rates. MicroStockHub/Getty Images

After months of waiting, borrowers have finally gotten the shift in monetary policy they've been waiting for. The Federal Reserve cut its benchmark interest rate by 25 basis points yesterday — marking the first cut of 2025 and lowering the benchmark rate to a range of 4% to 4.25%, down from a range of 4.25% to 4.5%. The move followed nearly a year of the Fed holding rates steady as policymakers grappled with sticky and then rising inflation.

However, mortgage rates reacted to the mix of rate cut speculation and 10-year Treasury yield declines before the Fed's decision was even official. Shortly before the Fed's announcement, the average 30-year fixed mortgage loan rate eased to 6.13%, its lowest point in three years. That's down sharply from the 7%-plus mortgage rates that were common at the start of the year.

This drop in mortgage rates offers new opportunities for both buyers and homeowners considering refinancing. What does it mean in real numbers for someone with a sizeable loan, though? Below, we'll break down how much the payments on a $500,000 mortgage would be each month at today's rates.

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How much does a $500,000 mortgage cost monthly now that interest rates were cut?

This week's drop in mortgage rates may not seem huge on paper. However, when you're borrowing hundreds of thousands of dollars to buy a home, even small rate shifts can add up to significant monthly savings.

At today's average rate of 6.13% for a 30-year fixed loan, the principal and interest payment on a $500,000 mortgage comes to $3,039.67 per month. That's the baseline cost before property taxes, insurance or other housing expenses are added.

Compare that to the start of the year: In mid-January, when the average 30-year mortgage rate sat at 7.04%, the monthly payment on the same $500,000 loan would have been about $3,339.96. The difference? Roughly $300 per month, or more than $3,600 per year in savings just from slightly lower interest costs.

That extra breathing room in the budget can make a big difference for many types of borrowers. For first-time buyers, for example, it may be the factor that helps them qualify for a loan they otherwise couldn't afford. For move-up buyers, it may expand their options in a competitive market. And for existing homeowners, it underscores why tracking rates closely can open the door to smart refinancing decisions.

It's also worth noting the long-term implications of this type of rate drop. Over the full 30-year life of a loan, the difference between paying at January's 7.04% rate and today's 6.13% rate amounts to more than $100,000 in total interest savings. That's why even small rate adjustments from the Fed — combined with market momentum — can carry such weight in the housing sector.

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How much would it cost to refinance a $500,000 mortgage at today's rates?

The rate cut isn't just good news for new buyers. It also provides opportunities for current homeowners to refinance at lower rates. The savings depend on the type of loan term you choose, but here's what your monthly payments would be if you were refinancing a $500,000 mortgage loan at today's average rates:

• 15-year refinance at 6.00%: On a $500,000 loan, the monthly principal and interest payment would be $4,219.28. That monthly payment amount is higher than the monthly payment on a 30-year loan because the repayment period is shorter, but it allows homeowners to pay off their mortgage faster and save significantly on total interest costs.
• 30-year refinance at 6.72%: For those who prefer to keep payments lower and spread them out over a longer term, the monthly payment would be $3,233.03. That's still lower than what many homeowners were paying earlier this year, when loan rates hovered above 7%.

The bottom line

The Fed's decision to cut rates for the first time in 2025 has brought much-needed relief to the mortgage market. With average 30-year rates dipping to 6.13%, the cost of borrowing is hundreds of dollars cheaper per month than it was at the start of the year for a $500,000 loan.

For buyers, that could mean the difference between stretching beyond budget and finding a sustainable payment. For homeowners, it may be a chance to refinance into more favorable terms and lock in monthly savings. And, rates may continue to move in the coming months, especially if the Fed cuts further. But for now, one thing is clear: The cost of a half-million-dollar mortgage has dropped, and both new buyers and existing homeowners may stand to benefit.