Interest Rate
An interest rate is the percentage a lender charges for borrowing money. With a mortgage, the interest rate determines how much interest is included in each payment, alongside principal repayment.
Interest rates can be fixed for a term or change over time in variable or adjustable structures. Even small rate differences can have a significant impact when applied to large balances over many years.
Why this matters:
Rate differences can look minor on paper but add up to meaningful dollars over time. Understanding how rates work helps borrowers compare offers beyond just the headline number.
Related Mortgage Terms
Often confused with:
Prime Rate — Prime is a benchmark rate that influences many variable mortgages.
Closely related:
Fixed-Rate Mortgage — A common way rates are structured.
Variable-Rate Mortgage — A common alternative with different risk/behavior.
Next step:
Prime Rate — Understand the benchmark behind many variable mortgages.