Rate [Meaning] - MasterTerms.com

In loans and mortgages, the rate can be either fixed or variable, influencing how much interest a borrower will pay over the life of the loan. A fixed rate remains constant throughout the term, providing predictability in monthly payments, while a variable rate can change based on market conditions, potentially leading to lower initial payments but increased costs over time if rates rise. The rate is crucial in determining the total cost of the loan, as it directly affects the interest paid on the principal amount borrowed.

Rate Example

For example, if you take out a $200,000 mortgage with a fixed rate of 3% for 30 years, your monthly payment will be about $843, and over the life of the loan, you’ll pay approximately $143,000 in interest.

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