There are a few reasons people constantly talk about mortgage rates: not only do they impact your monthly payments and the total cost of your home loan, but your interest rate can also stick with you for the duration of the loan (up to 30 years). That’s a long time!

That’s why we'd like to explain everything about mortgage rates here in simple language. That includes what they are, how they impact your loan, and how you might be able to reduce your rate.

What Is a Mortgage Rate?

A mortgage rate is the percent of interest a lender charges on your home loan.

Let’s explain that in another way:

A mortgage rate is the fee you pay lenders in exchange for the privilege of borrowing money from them. This rate determines how much interest you will pay on top of the total loan amount throughout your loan term, usually 15-30 years.

It’s worth noting that mortgage rates play out differently with each loan type. While loans come in many forms, you need to understand two of the most common ones—fixed and adjustable-rate mortgages.

Fixed-Rate Vs. Adjustable-Rate Mortgages

Fixed-rate mortgages are popular with borrowers because they come with a “fixed” rate that does not change throughout the loan. In other words, once you lock in your rate, your monthly payments (principal and interest) never change.

Borrowers find this stability and predictability appealing because once they lock in a rate, they do not have to worry about rising or fluctuating monthly payments.

Unlike fixed-rate mortgages, adjustable-rate mortgages change over time. So, while you may have an initial fixed-rate period, it will eventually expire. And once it does, your rate will rise, typically yearly. So, while adjustable-rate borrowers may enjoy lower interest rates at the beginning of their loan term, their loan lacks the same predictability or stability fixed-rate borrowers have. 

Mortgage Rates: Putting Them In Perspective

Mortgage rates fluctuate based on various factors, including market conditions, the state of the economy, inflation, and more.

While interest rates are still historically low in 2024, they took a rollercoaster ride in 2022, surging from 3.22% in January to over 7% in October. So, what does that mean for buyers?

That depends on your perspective.

If you were house hunting in 2008 or even 2022, rates seem unimaginably high. However, if you remember purchasing a home in the 80s, when mortgage rates peaked at 16.63%, the mortgage landscape looks quite reasonable in 2024.

Getting the Best Mortgage Rate in 2024

While fluctuating mortgage rates are primarily out of your control, there are strategic steps you can take to get a better-looking rate.

Start with your credit score. That means paying your bills on time, eliminating debts, and checking your credit report for discrepancies. Typically, the higher your credit score, the lower your interest rate will be.

Next, work with the right lender—one that offers competitive interest rates and flexible loan terms and will work with you to build a custom loan package that suits your personal and financial goals.

Additionally, consider saving for a large down payment, a clear signal to borrowers that you are financially responsible and can be entrusted with a lower interest rate. And finally, ask your mortgage lender about paying points upfront to reduce your total interest rate.

JustChoice Lending: Your Mortgage Solution

At JustChoice Lending (JCL), we are a socially responsible mortgage lender providing competitive rates and personalized service. We assist clients of all income levels, including those from lower-income backgrounds, achieve their homeownership goals by improving their credit scores. Contact us today to speak with one of our mortgage experts to get started!