A 1% difference in mortgage interest rates can mean a difference of about 8.23 million yen over 35 years?
“Does a difference of just 1% in mortgage interest rates really change things that much?”
When buying a home, you might carefully compare property prices and floor plans, but you might choose a mortgage interest rate somewhat casually.
However, a mortgage is a large loan that requires repayment over several decades.
A slight difference in interest rates can have a major impact on your future household finances.
In this article, we will explain the differences in interest rates in an easy-to-understand way, using the example of a 40 million yen loan over 35 years.
■ 1. How much difference is there between a 1% and 2% interest rate?
First, let’s compare them under the following conditions:
・Loan amount: 40 million yen
・Repayment period: 35 years
・Repayment method: Equal principal and interest repayment
・Bonus payments: None
・Interest rate: 1.0% per annum and 2.0% per annum
We assume that the interest rate remains unchanged for 35 years in both cases.
At 1.0% per annum, the monthly repayment amount is approximately 112,914 yen.
At 2.0% per annum, the monthly repayment amount is approximately 132,505 yen.
The difference is approximately 19,591 yen per month.
When you hear about 20,000 yen per month, doesn’t it feel surprisingly significant?
■ 2. What is the total repayment amount over 35 years?
What we also want to focus on is the total amount paid by the time the loan is fully repaid.
At 1.0% per annum, the total repayment amount is approximately 47.42 million yen.
At 2.0% per annum, it is approximately 55.65 million yen.
Surprisingly, the difference is approximately 8.23 million yen.
Even if you borrow the same 40 million yen, a difference in interest rates can lead to a gap of this magnitude.
However, this is a comparison assuming the interest rate remains constant from beginning to end.
This does not mean that if the variable interest rate rises by 1% midway, the total cost will increase by 8.23 million yen exactly.
■ ③ What is the difference between variable and fixed interest rates?
Mortgage interest rate types are broadly divided into variable interest rates and fixed interest rates.
A variable interest rate is a type where the interest rate is reviewed even after borrowing.
Generally, the initial interest rate is lower, but there is a possibility that the repayment burden will increase due to future interest rate hikes.
On the other hand, with a full-term fixed interest rate, the interest rate decided at the time of borrowing does not change until the loan is fully repaid.
While it makes it easier to plan future repayments, the initial interest rate tends to be higher than that of a variable interest rate.
There are also types that fix the interest rate for a certain period.
Neither is absolutely more advantageous; the results change depending on future interest rate trends and the state of your household finances.
■ ④ Is it safe if there is a “5-year rule”?
Some variable interest rate products have a “5-year rule” that keeps the monthly repayment amount unchanged for a certain period even if the interest rate rises, or a “125% rule” that limits the increase in the repayment amount to a certain range.
However, this does not apply to all mortgages.
And this is important.
Even if the repayment amount does not change, if the interest rate rises, the proportion of interest in the repayment amount increases, and the principal may decrease more slowly.
In other words, just because the repayment amount is deferred does not mean that the impact of interest rate hikes disappears.
■ ⑤ Should you choose a bank based solely on the interest rate?
When comparing mortgages, pay attention to costs other than the interest rate.
For example, loan handling fees, guarantee fees, the coverage details and additional interest rates for group credit life insurance, and early repayment fees.
Even if the interest rate is low, if the initial handling fees are high, the total burden may be greater.
Also, the coverage of group credit life insurance, which prepares for illness or emergencies, is an important point to consider for your family’s livelihood.
It is important to compare not just the immediate interest rate, but the total costs and coverage over the entire repayment period.
■ Summary
When it comes to mortgages, it is important to consider not just the amount you can borrow, but the amount you can continue to repay without strain.
In this calculation, a 1% difference in interest rates resulted in a difference of approximately 8.23 million yen over 35 years.
When buying a home, you should spend as much time choosing your mortgage as you do choosing the property itself.
Will you be able to maintain a comfortable lifestyle even if interest rates rise in the future?
I believe having that perspective will lead to a home purchase you won’t regret.
*The amounts in this article are rough estimates for comparison purposes. They are calculated under the conditions of a fixed interest rate for the entire period, monthly repayments, and excluding miscellaneous expenses, taxes, and group credit life insurance premiums. They do not indicate actual applicable interest rates or future interest rates.
Reference materials:
Japanese Bankers Association, “Regarding Explanations on Interest Rate Fluctuation Risk, etc., for Mortgage Borrowers” (June 18, 2026)
https://www.zenginkyo.or.jp/news/2026/n061801/
Japan Housing Finance Agency, “Interest Rate Information”
https://www.jhf.go.jp/kinri/index.html