The Top 5 Factors That Affect Your Mortgage Interest Rates

Mortgage 101
Interest rates are the cost of borrowing money and they're always changing. Here are some things that will effect the interest rate of your mortgage.
Published on
August 16, 2023
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If you're in the market to purchase a home or refinance your current mortgage, one of the most important factors to consider is your interest rate. Interest rates can have a significant impact on the overall cost of your mortgage, affecting both your monthly payments and the total amount you pay over the life of the loan. In this blog, we'll explore the top 5 factors that can affect your mortgage interest rates.

Credit Score

Your credit score is one of the most important factors that lenders consider when determining your mortgage interest rate. Your credit score is a numerical representation of your creditworthiness, based on your credit history, including your payment history, credit utilization, length of credit history, and recent credit inquiries. The higher your credit score, the lower your interest rate will typically be.

Loan-to-Value Ratio

Your loan-to-value (LTV) ratio is the ratio of the loan amount to the appraised value of the property. Lenders use this ratio to assess the risk of the loan. If the LTV is high, meaning the loan is a large percentage of the value of the property, the interest rate may be higher to compensate for the increased risk.

Down Payment

The size of your down payment can also affect your interest rate. A larger down payment can indicate to lenders that you're a lower risk borrower, and may result in a lower interest rate. Conversely, a smaller down payment may result in a higher interest rate, as lenders may see you as a higher risk borrower.

Loan Term

The length of your loan term can also impact your interest rate. In general, shorter-term loans, such as 15-year mortgages, typically have lower interest rates than longer-term loans, such as 30-year mortgages. This is because the lender assumes less risk with a shorter-term loan, and can therefore offer a lower interest rate.

Economic Factors

Mortgage interest rates can also be influenced by broader economic factors, such as inflation, the federal funds rate, and the state of the economy. For example, when the Federal Reserve lowers the federal funds rate, mortgage interest rates may also decrease. When the economy is strong, interest rates may rise as a result of increased demand for credit.


When it comes to mortgage interest rates, there are several factors that can influence the rate you're offered. Understanding these factors and how they can affect your interest rate is key to getting the best deal on your mortgage. By focusing on factors such as your credit score, down payment, and loan term, you may be able to secure a lower interest rate and save money over the life of your loan. As always, it's important to work with a reputable lender who can help guide you through the process and provide the support you need to make the best decision for your financial situation.

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