What does "Interest rate" mean?

Definition

The interest rate is the percentage a lender charges you to borrow money for a mortgage. This rate can be fixed, staying the same for the life of the loan, or variable, meaning it can change.

Understanding Interest Rates in Mortgages

Interest rates appear when you shop for a mortgage and affect your monthly payment. They represent the cost of borrowing money from a lender. In simple terms, a lower rate means you pay less over time. Example: If you borrow $100,000 at a 3% interest rate, you'll pay $3,000 in interest the first year. It's not just about the rate itself; it's also about the loan type and term. Many think rates stay constant over the loan's life, but adjustable-rate mortgages can change periodically.

People Want To Know

Will mortgage rates ever be 3% again?

Mortgage rates may return to 3%, but current market conditions and economic trends suggest they are more likely to remain above that level in the near term. Factors such as inflation, Federal Reserve policies, and overall economic stability influence interest rates. Monitor these factors for potential changes in the future.

How much is a $400,000 mortgage payment for 30 years?

A $400,000 mortgage payment for 30 years at a 3% fixed interest rate is approximately $1,686 per month. At a 4% fixed interest rate, the monthly payment increases to about $1,909. These amounts exclude property taxes, insurance, and any additional fees.

Is 2.75 a good mortgage interest rate?

A 2.75% mortgage interest rate is considered a good rate, especially in a historical context. Rates below 3% are generally favorable and can lead to significant savings over the life of the loan. However, the overall cost of the mortgage will also depend on the loan term and other factors like fees and down payment.

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More From The Mortgage Glossary

Interest rate cap

An interest rate cap is a limit on how high or low the interest rate on an adjustable-rate mortgage can go. It protects you from extreme rate fluctuations.

Investment Property

An investment property is real estate purchased with the goal of generating income, either through rent or by selling it later for a profit.

Jumbo loan

A jumbo loan is a conventional loan that exceeds the loan limits set by government-sponsored enterprises. It's used for high-cost properties where the loan amount is larger than what a standard mortgage can cover.