What Is Interest Rate?
Interest Rate: The yearly cost of borrowing, as a percentage of your loan balance.
Also called: note rate
The interest rate, or note rate, is what the lender charges each year to borrow money, as a percentage of the balance. It sets your principal and interest payment.
What moves mortgage rates
- The market: mortgage rates follow mortgage-backed securities, which track inflation, the economy and Federal Reserve policy
- Your credit score
- Your loan-to-value ratio
- Loan program, term and amount
- Occupancy: primary homes get better pricing than investment properties
- Points or credits you choose
How it affects your payment
On a $350,000 30-year loan, each 0.25% change in rate changes the monthly payment by roughly $55 to $60.
Rate vs. APR
The interest rate doesn't include fees. The APR does, so it's the better way to compare loans with different costs.
Good to know
Advertised rates often assume excellent credit, 20% or more down and paid points. Unbeatable prices each program on your own profile and the home.