Interest rate
The percentage a lender charges to borrow the principal, before fees. It drives your monthly payment; the APR captures the rate plus certain costs.
What does interest rate mean?
The note rate is the raw price of borrowing the principal, and it drives the size of your monthly payment. It is not the whole cost of the loan, though — that is what APR captures by folding in points and fees. A small difference in rate compounds into a large difference in total interest over a 30-year term, which is why shopping to save even a quarter of a percentage point is worth the effort.
What half a percentage point costs
Small rate differences become large dollar amounts over 30 years. On a $400,000 loan, 7.0% means a principal-and-interest payment of about $2,661; 7.5% means about $2,797. That $136 monthly gap adds up to roughly $48,800 over the life of the loan.
What sets your rate
Market rates follow the 10-year Treasury yield plus a lender spread, which no borrower controls. On top of that, your own quote moves with factors you can influence:
- Credit score — pricing improves in steps, with the best rates usually at 760 and above.
- Down payment / loan-to-value — more equity means lower risk and a better rate.
- Loan type and term — 15-year loans and government programs often price below 30-year conventional loans.
- Discount points — paying upfront buys the rate down.
- Shopping — quotes for the same borrower can differ by a quarter of a percentage point or more between lenders.
Frequently asked
What is a good mortgage interest rate?
A good rate is one at or below what is being offered to borrowers with your credit profile on a given day — rates move constantly.
Because even a quarter of a percentage point compounds into thousands over 30 years, the real win is comparing several lenders rather than chasing a headline number.
What determines my mortgage interest rate?
Your credit score, down payment, loan type and term, plus the wider bond market. You control the first few — a higher score, a larger down payment and a shorter term all pull your rate down — while market forces set the baseline everyone starts from.
Put it to use
All glossary terms Mortgage Calculator
Estimate your monthly principal-and-interest payment and see a full amortization schedule for any home loan.
APR Mortgage Calculator
Convert a rate plus points and fees into the true annual percentage rate (APR) of your mortgage.
Adjustable-Rate Mortgage (ARM) Calculator
Project payments through the fixed period and the rate adjustments that follow on an ARM.