With all this talk in Washington about the potential for interest rates for mortgages, cars and other lending to increase, we thought it would be helpful to know what that means. An increase of a quarter of a point, or .25% may not seem like a lot- but the extra cost to the borrower can add up quickly.

For example, on a typical 30-year fixed $200k mortgage, the principal and interest payment at 5% would be $1073/month. If rates go up .25% to 5.25%, the same principal and interest payment would be $1104. A difference of more than $30/month just for that small increase in rates on a relatively low mortgage amount.

What if the amount were greater? For example, on a typical 30-year fixed $400k mortgage, the principal and interest payment at 5% would be $2147/month. If interest rates went up .25% to 5.25%, the same principal and interest payment would be $2208/month. A difference of $61/month for each .25% increase in the rate.

If you are shopping for a loan and interest rates are fluctuating within .25% to .5%, it may not be such a big deal. However, when the markets are volatile you can see huge swings in interest rates which can mean big changes to your expected monthly payment if you aren't locked in to your rate.