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Mortgage Interest Rates, Points, and APR

Interest Rates

Mortgage interest rates vary with the market so I won't talk numbers here, just things you should be aware of. The best place to check the going interest rate is at bankratemonitor.com. The low interest rates you see at that site or anywhere else are for conforming loans. Non-conforming interest rates are based on risk. The higher the risk the higher the rate.

I strongly recommend that when you get a mortgage you use a Mortgage Broker. A broker can get you a better interest rate 98% of the time. Even conventional rates vary dramatically from one lender to another.

Most brokers have access to dozens and dozens of lenders where a Bank only has a few programs. Most Banks take only the best of the best. The smallest flaw could be justification for being turned down. A Broker having so many lenders will know exactly where your loan will be approved. A broker will go the extra mile where a Bank will usually walk you to the door.


You can lower your rate (and payment) with points.One point is equal to 1% of the loan amount and paid to the lender at closing. With many loans you can lower the rate by paying points. If you have the cash it is a good way to save money on interest over the life of the loan. Your decision should center on how long you intend to be in the house.


Mortgage loans are more than interest rates and points. The APR expresses the annual cost of a loan as a percentage. It factors in not only the rate, but the points and other costs over the life of the loan. It is intended to enable you to compare the costs of a loan from one lender to another.

To make an accurate comparison, compare loans with the same terms, rate, and points. Then look at the APR. The loan with the lowest APR cost less.

Pre Payment Penalties

Always find out if there is a pre-payment penalty, how long it is for, and how it is calculated. The main issue with a pre-payment penalty is how soon you expect to refinance.

Also be ware of subsidized loans such as special bond programs or farmers home loan programs that have a recapture clause. A recapture clause means you have to pay back any subsidy or bond if you refinance or sell your home. All loans are different so be sure to ask for the particulars.

Locking Your Interest Rate

Locking or floating your interest rate should be discussed with your loan officer but ultimately it should be your decision. Waiting for rates to go down can be risky. You should consider do you have a good rate now, are the payments where you want them, and are you accomplishing your objective at the given rate (most important in a refinance).