Mortgage Rates

What is a’ Mortgage Rate
Mortgage rates are the rate of interest charged on a mortgage. They are determined by the lender in most cases, and can be either fixed, stay the same for the term of the mortgage, or variable, fluctuate with a benchmark interest rate. Mortgage rates rise and fall with interest rates and can drastically affect the homebuyers’ market.

 Determining a Mortgage Rate
A lender assumes a level of risk when it issues a mortgage, for there is always the possibility a customer may default on his loan. There are a number of factors that go into determining the mortgage rate, and the higher the risk, the higher the rate. A high rate ensures the lender recoups the initial loan amount at a faster rate in case the borrower defaults, protecting the lender’s financial investment.

The borrower’s credit score can often play a role in the rate charged on a mortgage and the size of mortgage loan he is able to obtain. A higher credit score indicates the borrower has a good financial history and is more likely to repay his debts. This allows the lender to lower the mortgage rate because the risk of default is lower. The rate charged ultimately determines the overall cost of the mortgage and the amount of the monthly payment. Therefore, borrowers should always seek the lowest rate possible.