The mortgage rate is the rate in which the repayment terms of your mortgage are based upon. There are hundreds of different loan programs, and each one has unique mortgage rates attached to them.

Mortgage rates can be both fixed and variable rate. A fixed rate will never change over the life of the loan. A variable rate changes over time and is normally tied to one of many indexes.

Your mortgage rate is determined by the amount of risk you represent to the lender. If the lender sees you as more likely to default on your loan, you will receive a higher interest rate than if you are considered a 'safe' borrower.

The more equity you have in your home the less risk you will generally be to the bank and the better the interest rate should be that you will qualify for. One reason for this is the more invested you are into your property the more you have to lose and the less the bank has to lose. When you owe a bank the full mortgage amount that your home is valued at, this is when you will see higher interest rates for your personal home loan.

Mortgage rates are often based on an Index and a Margin. An Index is a regularly published rate that can be based on several different market indicators. Common Indexes are PRIME, MTA, COSI, COFI, and LIBOR. The Margin is the portion of the rate that is added on by the lender.

Every margin has good and bad factors about them. Ask your mortgage broker for a recommendation of what index is better for you.

 

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