Here's how much a $700,000 mortgage can cost per month, following the December Fed rate cut
While home prices are expected to drop in almost two dozen U.S. cities next year, according to a recent report, the reality is that home prices are currently elevated in many parts of the country. And while that may not have pushed homeownership totally out of reach for some buyers, it's certainly made it more expensive. At the same time, there's been a silver lining in 2025 that can potentially improve even further next year: Mortgage interest rates are declining again.
Starting the year over 7% for a traditional 30-year term, mortgage rates are down by around a full percentage point now, in the final days of the year. That's partially due to a series of Federal Reserve interest rate cuts, the third of which was issued on December 10. This can go a long way toward making mortgages, such as a $700,000 loan, more affordable and attractive to buyers.
Considering that a loan of this size isn't abnormal in many parts of the country, then, it can be helpful to know what the associated payments would look like now, following the latest Fed rate cut. Below, we'll detail the numbers buyers should expect.
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Here's how much a $700,000 mortgage can cost per month, following the December Fed rate cut
The average mortgage interest rate on a 30-year mortgage is now 6.12% and just 5.50% for a 15-year term. Both are higher than what borrowers could have secured at the start of the decade, but both are also considerably lower than the averages many have become accustomed to post-2022. Here's how much a $700,000 mortgage would cost, calculated against these two rates and terms, not accounting for insurance costs, taxes or private mortgage insurance (PMI):
- 30-year mortgage at 6.12%: $4,251.01 per month
- 15-year mortgage at 5.50%: $5,719.58 per month
For context, here's what a mortgage of this size would have cost in the days following the Fed's October rate cut:
- 30-year mortgage at 6.17%: $4,273.67 per month
- 15-year mortgage at 5.41%: $5,686.21 per month
And here's what it would have cost buyers in January 2025, before any Fed rate cuts were issued for the year:
- 30-year mortgage at 7.04%: $4,675.94 per month
- 15-year mortgage at 6.27%: $6,009.59 per month
So payments here are significantly cheaper than where they started in 2025, down around $425 a month for the 30-year option (approximately $5,100 in annual savings) and around $290 monthly for the 15-year option (savings of $3,480, roughly). While 15-year mortgage purchase rates are around the same as they were after the Fed's October rate cut, 30-year mortgage rates are a bit lower. But every dollar here counts, and today's rates may be the difference between being able to afford a $700,000 mortgage and not. So, it's worth calculating your costs carefully now that new, more affordable options are available.
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Don't forget about mortgage rate float-down options
Following three Fed rate cuts in the final four months of the year – combining to lower the federal funds rate by three-quarters of a point – homebuyers may be tempted to wait for mortgage rates to decline even further. But that's far from a guarantee, and incorrect timing of the market could even result in missing out on today's new, lower-rate opportunities.
Instead, these buyers should consider locking in one of today's rates and employing a mortgage rate float down option to take advantage of lower rate offers, should they materialize before the loan is closed on. This may come via a slight fee, but it could be worth it for buyers as they'll be able to budget with precision with today's lower rate offers and simultaneously keep themselves in contention for better offers that may materialize in the near future.
The bottom line
A $700,000 mortgage loan comes with monthly payments between $5,720 and $4,251 right now, following the Federal Reserve's December Fed rate cut. But it's also important to remember that these estimates assume no down payment. If you want to purchase a $700,000 home and elect to make the conventional $140,000 down payment (20%), you'll pay even less. Spend some time, then, calculating your costs. With mortgage rates declining again, albeit slowly, you may already be able to afford a loan of this size.
