Definition: The term "mortgage interest rate" refers to a specified rate at which a borrower will pay back their loan on an ongoing basis over a period of time, such as 12 months, 6 months, or any other length agreed upon by both parties. The interest rate is typically expressed in percentage terms, such as "5%," "7%" or "4.9%." The term "mortgage" refers to the obligation on the borrower to pay back a loan amount borrowed from a lender for the purpose of purchasing an asset or property. The word "rate" describes how much a particular rate will vary over time, and the word "interest" describes what is paid back each month. In summary, the rate of interest represents the percentage by which the principal amount is increased or decreased during each period of the loan repayment schedule, while the interest rate refers to the annualized percentage rate of interest as calculated on the outstanding balance at the end of a specific term. For example, if a borrower pays $10,000 with a 5% rate per annum for 3 years, they will pay back $7,500 over three years. The total amount paid to the lender can be found in the interest statement or on the loan's repayment schedule.
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