Mortgage Rate
The interest rate charged on a mortgage loan, expressed as an annual percentage. This rate determines how much interest you'll pay on the borrowed amount over the life of the loan and directly affects your monthly mortgage payment.
Example
“The current mortgage rate of 6.5% means Sarah will pay significantly more in monthly payments than if she had locked in last year's 3% rate.”
Memory Tip
Think 'MORE-gage rate' - the higher the rate, the MORE you'll pay each month.
Why It Matters
Even a small difference in mortgage rates can save or cost you tens of thousands of dollars over the life of your loan. Shopping around for the best rate is one of the most impactful financial decisions in home buying.
Common Misconception
Many people think the advertised rate is what they'll automatically receive, but your actual rate depends on your credit score, down payment, and other financial factors.
In Practice
If you're comparing a 6.5% rate versus a 7% rate on a $400,000 loan, the lower rate would save you approximately $120 per month and $43,000 over 30 years.
Etymology
From Old French 'mort gaige' meaning 'dead pledge,' referring to how the pledge dies when either paid off or foreclosed upon.
Common Misspellings
Compare the best financial products for you
More in financing
Other financing terms you should know
Need financial definitions?
Clear definitions for 2,500+ finance, insurance, and investing terms.