What are the monthly payments on a $400,000 mortgage after the Fed's rate cut?
After months of holding firm, the Federal Reserve lowered its benchmark rate by 25 basis points last week — the first cut of 2025. That move has created a compelling window for homebuyers and existing homeowners, as mortgage rates have now dropped to levels not seen since early 2022. At an average of 6.13%, the current 30-year fixed mortgage rate represents a dramatic shift from the environment borrowers faced throughout much of 2024, when rates regularly exceeded 7% and pushed many potential buyers to the sidelines.
This new rate environment has, perhaps unsurprisingly, sparked renewed activity across the housing market. And, the timing is especially beneficial for those looking to finance a $400,000 home purchase, a price point that sits near the median home sales price in many major metropolitan areas across the country. With mortgage rates having fallen by more than a full percentage point from their recent peaks, the monthly payment differences can meaningfully impact household budgets and buying power.
For borrowers who have been waiting on the sidelines, these rate improvements could be the catalyst that finally makes homeownership financially feasible. At the same time, current homeowners may find that refinancing has become an attractive option after years of being effectively locked into their existing loans. What exactly are the monthly payments on a $400,000 mortgage loan now that the Fed has cut rates, though? That's what we'll calculate below.
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What would the monthly payments be on a $400,000 mortgage now that the Fed has cut rates?
At today's average rate of 6.13% for a 30-year fixed loan, the principal and interest payment on a $400,000 mortgage comes to $2,431.74 per month. Note, though, that this monthly payment amount only includes the core borrowing costs, excluding additional expenses like property taxes and homeowners or private mortgage insurance, all of which are typically bundled into your total monthly housing payment.
The possible savings at today's rates compared to earlier in the year are quite impressive, too. When rates averaged 7.04% back in January 2025, that same $400,000 loan would have required monthly payments of $2,671.96 for the principal and interest. That means the current rate environment delivers monthly savings of about $240, which adds up to more than $2,882 in annual savings simply due to the rate decline.
Looking back even further reveals the full scope of these improvements. One year ago, when mortgage rates peaked around 7.79% in October 2024, monthly payments on a $400,000 loan would have reached $2,876.71. Compared to those peak rates, today's borrowers are saving nearly $445 per month, or almost $5,340 annually.
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How much would it cost to refinance a $400,000 mortgage at today's rates?
Current homeowners aren't excluded from benefiting from the improved rate environment. The drop in mortgage rates has opened up attractive refinancing opportunities, with the potential savings depending on your current rate and preferred loan term. If you're considering refinancing a $400,000 mortgage balance, here's what your monthly payments would look like at today's average refi rates:
A 15-year refinance at 5.98%: Homeowners who want to accelerate their payoff timeline while capitalizing on lower rates by opting for a 15-year loan term would face principal and interest payments of $3,371.11 per month. Though this payment exceeds a 30-year option, it allows you to eliminate mortgage debt in half the time while saving substantially on interest costs over the loan's duration.
A 30-year refinance at 6.67%: Those prioritizing manageable monthly payments while still capturing today's favorable 30-year refinancing rates would see principal and interest payments of $2,573.16 monthly. This option could make sense for homeowners whose current rates sit significantly above today's market rates, particularly those who originally borrowed when rates exceeded 7%.
The bottom line
The Fed's rate cuts have delivered meaningful relief to the mortgage market, with 30-year rates reaching their most attractive levels in nearly three years. For a $400,000 mortgage, this translates to monthly savings of roughly $240 compared to rates earlier this year, plus substantial long-term interest savings over the loan's lifetime.
In other words, the cost of financing a $400,000 mortgage loan has dropped so substantially that it's created opportunities for both prospective buyers and existing homeowners to improve their financial position. Before making any moves, though, it's important to carefully evaluate your personal financial situation and compare offers from multiple lenders to fully ensure that you're making the right decision for your finances.