What Is A Mortgage Rate?

A mortgage rate is what determines how much money the mortgage lender gets back overall for taking the risk of lending out a large amount of money. Rates often vary by loan type and amount of money, as well as personal credit score and current financial situation. Mortgage rates work by every year taking the percentage determined by the rate and then re-adding it to the loan total. So basically if you have a $100,000 loan, with a mortgage rate of 6%, the first year if no part of the loan was paid off, $6,000 would be added to the total. That is the most basic way to look at it. There are many different factors and variables that play into the amount of money added and total amount accrued but basically you can look at a mortgage rate as an amount added every year based on the value of the loan.

It is important to get a good mortgage rate in order to make lower monthly payments to easily be able to afford to repay the loan. Without shopping around and finding the most competitive rate a home buyer might potentially pay tens of thousands of dollars more by the end of the loan. In order to understand mortgage rates more, please use our mortgage info center to look at types of rates and how they apply to various loan types and amounts.