Mortgage interest rates have dropped by more than a full percentage point, on average, from where they were toward the end of 2023. And after this week they could fall further. With the Federal Reserve now poised to issue its first federal funds rate cut since 2020, homebuyers could finally experience some relief when it comes to mortgage interest rates. 

While this week’s cut is predicted by many to be just 25 basis points (which may already be priced in by many lenders), the months ahead offer the potential for additional cuts, both when the Fed meets in November and again in December. Further reductions could be issued in 2025, too.

Against this backdrop, prospective homebuyers should start making select preparations now. One of the most important is to calculate the potential costs of a mortgage each month. And with a record amount of homes in the U.S. worth $1 million or more right now, that means many buyers should start calculating their potential monthly mortgage payment. Below, we’ll break down what a $1 million mortgage costs per month now – and what it could cost after rates are cut.

See how low of a mortgage interest rate you could secure here today.

How much will a $1 million mortgage cost per month after rates are cut?

To determine if it’s worth waiting for mortgage rate cuts, it’s helpful to first understand what you’d pay for a $1 million mortgage per month right now. Here’s what those monthly payments would be for qualified borrowers based on average rates for two loan terms (assuming the conventional 20% down payment of $200,000, minus taxes and insurance):

• 15-year mortgage at 5.78%: $6,656.14 per month
• 30-year mortgage at 6.41%: $5,009.29 per month

Mortgage interest rates don’t directly follow the federal funds rate, so a drop by 25 basis points in the former isn’t likely to be exactly replicated for mortgages. Still, rates could fall by that amount over the next few weeks and months. 

Here’s what a monthly mortgage payment would look like on a $1 million home assuming the same caveats as above:

• 15-year mortgage at 5.53%: $6,549.41 per month
• 30-year mortgage at 6.16%: $4,879.01 per month

Here’s what payments would be with a half a percentage point reduction:

• 15-year mortgage at 5.28%: $6,443.65 per month
• 30-year mortgage at 5.91%: $4,750.21 per month 

And here’s what they could look like at the end of the year or in 2025 if rates come down a full percentage point from today’s averages:

• 15-year mortgage at 4.78%: $6,235.05 per month
• 30-year mortgage at 5.41%: $4,497.24 per month

So homebuyers who wait could potentially save hundreds of dollars per month on their monthly mortgage payments if rates fall half a percentage point. But there’s no exact timeline for when that will happen. And even if it does, it could mean increased homebuyer competition, higher home prices and missing out on your dream home while waiting for cooler rates. So carefully weigh these potential complications against the potential savings to better determine the best path forward.

Compare today’s top rates and lenders here now.

The bottom line

Monthly mortgage payments on a $1 million mortgage will cost qualified borrowers upward of $6,500 or $5,000 right now, depending on the mortgage term, even with the conventional 20% down payment. But with the growing amount of homes in the U.S. priced at this point or higher, this is a reality many buyers are already confronting. The question then revolves around waiting for rates to fall. While potential rate cuts could lead to hundreds of dollars in savings, waiting will pose its own set of complications and issues, including higher home prices that could easily negate any rate savings. So approach the process carefully and start crunching the numbers now to decide if it’s worth waiting or acting.