**Interest**: The fee charged for borrowing money.

**What is Mortgage Interest Rate?**

The interest rate is fee charged by a lender from the borrower to obtain a loan. **Mortgage Interest Rate** is a small percentage of the amount paid to the lender on the total amount loaned. The interest rate does not remain same throughout, it keeps on changing depending upon the current interest rate prevailing in the market. The interest rates are quoted by the lenders on yearly basis and so to calculate the mortgage interest payment on monthly basis, the rate is divided by 12 and you get the interest payment because on most home mortgages the interest payment is calculated monthly.

Mortgage interest rates keeps changing from time to time because the factors depend on supply and demand. If the demand for the credit increases then supply will increase and eventually the **interest rate** will also increase, and vice versa. In simple words we can say that if the economy is good then higher interest rates and if the economy is bad then lower **Mortgage Rates**. Along with economy there are many other factors that affect the mortgage interest rate.

Many borrowers are not aware of the factors that can affect the **Mortgage Interest Rate.** When you get a clear understanding of the factors and you know why the loan rate changes from time to time, you feel confident to choose the best loan and act accordingly to eventually save some money.

The Different factors that affect the mortgage interest rate which we found online are:

**The Market**: Federal Reserve Board has the right to change the interest rates from time to time. As the rate changes it has got the direct effect on the borrowers, so the interest rate also changes accordingly. In fixed rate mortgage, the rate is fixed no matter what the current interest rate is but for adjustable rate mortgage, the interest rate changes according to market fluctuation.

**Points**: If you pay some extra point over your loan, you can decrease your interest rate.The discount on interest rate changes, but generally each point equals one percentage point of the total amount of the loan. Although upfront cost increases, the mortgage interest rate is lower.

**Occupancy**: When you apply for the loan, the first thing lenders ask is about what type of home loan you need. Either for full time, part time or for rent purpose. Generally the person who chooses a full time loan, gets lower interest rate than other who selects as a part time living or for rent.

**Credit History**: If you have a less than perfect credit then you will be eligible for the loan with higher interest rate. Good credit history means the less interest rate.

**Property Type** : Generally if you want to buy a single family house, the interest rate might be lower than for the multi family home, because it involves much risk. The greater the risk the more is the interest rate.

**Loan Amount**: As the loan amount increases, the interest rate decreases that is, if you borrow large sum of money it may result in a lower interest rate, as the lender can make-up the money over the term of the loan.

**Loan Period**: If the time period for your loan is a Shorter one, such as 20 years or 15 years, then there is a possibility for you to save thousands of dollars in interest payments over the life of the loan, but if the interest payment is low then your monthly payment will be higher.

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