The annual percentage the lender charges on the outstanding loan balance — the cost of borrowing the money, separate from fees.
Full Definition
The mortgage interest rate is the cost of borrowing, expressed as an annual percentage of the outstanding balance. It determines your monthly principal and interest payment. A fixed interest rate stays the same for the entire loan term; an adjustable rate (ARM) changes periodically based on a market index. Interest rates are determined by the lender based on the federal funds rate target, the 10-year Treasury yield (the primary benchmark for 30-year mortgages), your credit score, loan type, LTV, property type, and occupancy. The interest rate is not the same as the APR — the APR is higher and incorporates fees. When comparing loans, look at both the rate and the APR.
Related Terms
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