Interest rates are fees added to your debt for money loaned.  Interest rates are determined by many factors; including the current economy and your countries set interest rates.

The later being the driving force in regards to what you pay and what others will pay.  Interest rate sums are paid monthly in conjunction with the principle.  Generally speaking, for the first several years, you will pay more interest than principle.  Therefore, you will probably need to stay in your home for a long period of time before you actually start paying the principle owed on the home.

Depending upon the economy and appreciation of your home’s worth; you can make money or loose money.  Interest rates are offered to people in generally two methods, fixed or variable.

Fixed rates are interest rates that stay the same throughout the term of the loan.  Variable rates fluctuate according to the rates paid by your bank for money borrowed from the countries government. Variable rates can start low and go up according to the state of the economy.  Most financial planners suggest buying homes on fixed rate interests rather than variable rates.  Fixed rates can be lowered even more with paying points at closing on your home loan.

The rate of your interest savings is determined by your banks point formula.  Most banks a lot one point for a savings of one-eighth of a percent.  For example, you can pay 0 points and have a fixed interest rate of 5.5% for 30 years or pay 2 points at closing and have a fixed rate of 5.25% for 30 years.  Using a loan calculator or an amortization table will allow you to see your overall savings and when exactly that initial points cost will pay-off.