Mortgage Rate Differences: How Much Does 0.1% Change Your Total Repayment?

Total repayment at each interest rate

These are the amounts by rate for ¥30 million borrowed over 35 years with equal-payment repayment. This row of totals tells you more than the rate figures themselves.

Between 0.5% and 1.8%, the gap is ¥18,452 a month and ¥7.75 million in total. For the same property, the rate alone can make a difference big enough to buy a small car.

How much is a 0.1% difference?

Raising the rate from 1.0% to 1.1% adds ¥1,406 to the monthly payment and ¥590,181 to the total repayment. This difference varies with the loan amount and term.

As a rough guide, remember about ¥200,000 per 0.1% for every ¥10 million borrowed over 35 years, and you can convert a quoted rate quickly. When comparing lenders, use this conversion to check whether the difference outweighs the difference in fees.

Variable vs fixed rates

A variable rate is reviewed every six months and starts low in exchange. A fixed rate doesn't change until the loan is paid off (or for a set initial period) and is set higher in exchange. Choosing variable means accepting the risk of rising rates in return for lower payments.

Take ¥30 million over 35 years, borrowed at an annual 0.5%, and compare what would happen if the rate were different from the start.

In reality, a variable rate rises partway through. After 10 years of repayment at 0.5%, the balance is ¥21,957,223. If the remaining 25 years switch to 1.5%, the monthly payment becomes ¥87,814 (¥9,939 more than at the start), and at 2.5% it becomes ¥98,503 (¥20,628 more). Because 10 years of principal is already gone, the impact is smaller than if you'd borrowed at the higher rate from the start.

Estimating what refinancing saves

Refinancing means taking out a new loan with another lender for your remaining balance to get a lower rate. Here's the calculation for a ¥25 million balance with 25 years left, refinanced from 1.8% to 0.9%.

Total repayment falls by ¥3,136,657, and the monthly burden eases by ¥10,456. Subtract the refinancing costs from this (several hundred thousand yen for the processing fee, guarantee fee, registration and stamp duty) to get the real benefit.

Refinancing is said to pay off when three conditions are met: a balance of ¥10 million or more, at least 10 years left, and a rate difference of 1% or more. That's only a rule of thumb, and with a large balance even a 0.5% gap can recoup the costs. Run the numbers with your own balance and remaining term before deciding.

Compare rates with the tool

The Loan Repayment Simulator automatically shows a comparison table of rates around the one you enter. From −0.5% to +1.0%, it lists the monthly payment, total repayment and the difference from your entered terms.

1. 1

   Calculate with the quoted terms

   Enter the loan amount, rate and term to get the monthly payment and total repayment under those terms.

2. 2

   Look at the rate comparison table

   Rates around yours, including 0.1% steps, are listed with the difference in total repayment. Use it as a conversion table when comparing lenders' quotes.

3. 3

   Try rising-rate scenarios

   If you're considering a variable rate, change it to 1.5% or 2.5% and check the monthly payment. Whether you could still pay at that level is the test of whether variable is an option for you.

4. 4

   Estimate a refinance

   Enter your current balance as the loan amount and the remaining years as the term, then calculate at your current rate and the refinanced rate. Check whether the difference exceeds the costs.

To lower the total by means other than the rate, you can shorten the term or prepay. See the amounts in how to calculate loan payments and the effect of prepayment.

FAQ

How much does a 0.1% rate difference change the total repayment?

On ¥30 million over 35 years, the total repayment differs by ¥590,181 between 1.0% and 1.1%. The monthly difference is ¥1,406. The gap widens with a larger loan and longer term: ¥983,648 for ¥50 million over 35 years, and ¥393,489 for ¥20 million over 35 years. A rough guide is about ¥200,000 per ¥10 million borrowed over 35 years.

Should I choose a variable or a fixed rate?

It depends on whether you could keep paying if rates rise. If you borrow ¥30 million over 35 years at 0.5% and the rate reaches 1.5%, the monthly payment goes from ¥77,875 to ¥91,855, about ¥14,000 more. If your budget could absorb that, variable is an option; if not, fixed is the safer choice. Run an estimate at a higher rate before deciding.

With the 5-year rule and 125% rule, will my payment not go up?

It won't go up for 5 years, but the burden doesn't disappear. Even with the payment held steady, interest grows when rates rise, so less of the same payment goes to principal and principal falls more slowly. If rates keep rising, interest can exceed the payment, leaving interest you can't cover (unpaid interest). Eventually it has to be settled.

How far does the rate have to fall for refinancing to pay off?

The usual guide is three conditions: a balance of ¥10 million or more, at least 10 years left, and a rate difference of 1% or more. Refinancing a ¥25 million balance with 25 years left from 1.8% to 0.9% cuts total repayment by ¥3,136,657 and the monthly payment by ¥10,456. Subtract the costs (several hundred thousand yen) for the real benefit. With a large balance even a 0.5% gap can pay off, so entering your terms and calculating is the reliable way.

If rates are low, is it better to borrow for a longer term?

The monthly burden gets lighter, but total interest grows. For ¥30 million at 1.0%, interest is ¥5.56 million over 35 years and ¥3.91 million over 25, a ¥1.65 million difference. Low rates narrow the gap, but you'd still be older when you finish paying. Another option is to choose a longer term and prepay with spare funds.