Your mortgage interest rate is the annual cost to you to borrow money from your mortgage company. This rate is expressed as a percentage of your total loan balance and is paid on a monthly basis, along with your principal payment, until your loan is paid off.
Example: A 4% mortgage interest rate means you will pay 4% of your total loan balance in interest each year.
You will pay more in interest at the start of your loan because your loan’s principal balance is higher. As your loan’s principal balance goes down over the years, so does the amount of interest you pay each month.
The good news is the amount of principal you pay goes up over the years, just like the amount you pay in interest goes down.
Mortgage interest rates vacillate depending on larger economic factors and investment activity. The secondary market also plays a role. Fannie Mae and Freddie Mac bundle mortgage loans and sell them to investors looking to make a profit. Whatever interest rate those investors are willing to buy the mortgage backed securities (MBS) for determines what rates lenders can set on their loans.
For more information on mortgage financing, contact Steve at Nation’s Lending, 520-612-0479, or stop in at 210 W. Continental Road, Suite 116A, Green Valley AZ 85622.
Corp NMLS # 32416