What Is Interest Rate?

Your interest rate is the annual percentage your lender charges for the money you borrow, and it directly controls your monthly payment and total cost. Even a 0.25% difference can mean thousands over a 30-year loan. Rates depend on your credit score, down payment, loan type, and market conditions at the time you lock.

For example, on a $400,000 mortgage at 6.5%, your monthly principal and interest payment is about $2,528. At 7.0%, that same loan costs $2,661 per month—$133 more each month and roughly $47,880 more over 30 years. That is why shopping multiple lenders and comparing rates can save you significant money.

Key Facts

• Current range: 30-year fixed rates have hovered between 6.5% and 7.5% through early 2026
• Credit score impact: Borrowers with 740+ scores typically receive rates 0.5%–1.0% lower than those with 620 scores
• Discount points: Paying 1 point (1% of the loan amount) upfront usually lowers your rate by about 0.25%
• Fixed vs. adjustable: Fixed rates stay the same for the full term; adjustable rates can change after an initial period
• Rate lock: You can lock your rate for 30–60 days while your loan is processed to protect against market increases

Frequently Asked Questions

What determines my mortgage interest rate?

Your credit score, down payment size, loan type, loan term, and current market conditions all factor in. A higher credit score and larger down payment generally earn you a lower rate. Shopping at least three lenders can also help you find the best offer.

Is a lower interest rate always the better deal?

Not necessarily. A lower rate sometimes comes with higher upfront fees or discount points. Compare the APR, which includes fees, to see the true annual cost. If you plan to sell or refinance within a few years, paying points for a lower rate may not break even.