Glossary

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Interest Rate
Your interest rate is an amount of money that is added to the loan. This interest is in addition to the principal amount of the loan. It is how the lender makes a profit from the loan and is compensated for the risk taken when approving the loan. Most mortgages come with interest rates as low as 4 percent. This means that you will be charged 4 percent of any balance that you carry forward from month to month. You can see the interest you pay each month on your payment schedule. Borrowers who come with a higher risk of defaulting on the loan will be charged a higher interest rate. It is not uncommon to pay 6 percent or more for a home loan if your credit is really poor. Improving your credit profile will improve your chances of getting a loan at the lowest possible interest rate.