Every mortgage comes with the expectation that the amount borrowed will eventually be paid back in full. However, borrowing that much money comes with a cost, and simply paying off the principal loan won’t erase your debt. Just like any other business, lenders need to make a profit on the products they offer, like mortgages and personal loans. That’s why loans almost always come with the added stipulation of interest payments, which act as the cost of borrowing money. Mortgage interest rates, calculated as a percentage of the overall loan, describe how much you’ll pay to borrow money for a home purchase throughout the duration of the loan. When determining the cost of future mortgage payments, interest rates are a consequential factor for borrowers to consider. For example, a $100,000 30-year fixed mortgage might come with an interest rate of 3%, requiring the borrower to pay an additional 3% on top of their principal loan balance*. After years of making regular payments, the amount paid in interest begins to stack up and can become one of the more burdensome costs associated with mortgages. A fraction of a difference in mortgage rates can end up saving the borrower thousands of dollars by the end of the loan’s term, and a one percent difference in mortgage rates can equate to at least a 10% difference in the monthly mortgage payment. That’s why one of the most important aspects borrowers should review when choosing a lender is the interest attached to the loan. When paying off a mortgage, your mortgage interest compounds, meaning that if the borrower misses a mortgage installment, interest will be charged on top of the interest already accrued.