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A mortgage interest rate is the cost that a lender charges you to take out a home loan, excluding any additional fees. When you repay the loan, you must pay off the principal — which is the amount you borrowed — and the interest. As such, the interest rate is represented as a percentage of the principal.

Scoring a lower interest rate can help you save money over the life of your loan. However, it’s important to remember that your interest rate is only one factor that contributes to the total cost of borrowing money — and that the rate you’re offered is based on different factors, some of which aren’t under your control.

Although you can’t change current housing market conditions or the direction in which interest rates are trending, understanding how mortgage rates work puts you in a better position to know whether you’re getting a good deal on your home loan.

Learn more about how mortgage interest rates work and why they matter:

Featuring Annie Margarita Yang, Personal Finance Writer

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