What is a mortgage interest rate?

When a lender offers you an interest rate for a mortgage, the interest rate is the cost of borrowing money, expressed as a percentage of the loan. Most consumer mortgages use simple interest which is defined as paying interest only on the principal. Some loans use compound interest which is applied to the principal and also to the accumulated interest of previous periods (this is also known as a negative amortization loan). Borrowers are often quoted interest rates in addition to annual percentage rates (APRs), which are interest rates plus lender fees and charges. Related terms: annual percentage rate (APR), principal, negative amortization

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