Definition of Interest Rate:
Interest is the cost of borrowing money, and the interest rate on a home loan will always be lower than the annual percentage rate (APR) because the interest rate does not reflect all of the points and closing costs. Interest rates change daily, but once a borrower locks a rate for a fixed rate mortgage, they will make their payments according to this rate for the entire life of the loan. This is different than an adjustable rate mortgage, where the borrower’s rate can go up or down based on market factor’s or decisions made by the Federal Reserve Board (Fed). The interest rate is expressed as a yearly percentage that the borrower will pay on a monthly basis as part of their mortgage loan.