People often ask what the most important factor to consider is when you go shopping for a mortgage. The answer, of course, is the interest rate. The interest rate is the single most important factor that determines how much you end up paying over time for the privilege of taking out a mortgage. Therefore most people looking for a mortgage are on a continual quest for low interest rates. This article will explain what low interest rates are, why so many people want them, and where to go about finding them.

Interest is the amount of money the bank or mortgage lender charges for loaning you money. It is expressed as a percentage and calculated over a period of one year. Each time interest is calculated, the amount is added to the sum you borrowed to buy your real estate, which makes your monthly mortgage payments a combination of interest and the original sum you borrowed. Therefore the larger your interest rate, the more you're getting charged for borrowing the same amount of money. This is why everyone wants a low interest rate.

The definition of a low interest rate changes all the time, because the banks set their interest rates by a variety of fluctuating factors that include how well the world's markets are doing. Therefore when you go shopping for your mortgage a low interest rate might be 4%, but the next year a low interest rate is 3.5%. A lot of people want to take advantage of this fact when they're buying their home for sale, but predicting what interest rates will do in the future is difficult even for trained economists, so there is always an element of risk in trying to play the market.

Some people hold off on buying their house until the interest rate is low and then get a fixed rate mortgage that will guarantee them this rate until it comes time to renegotiate. Another way that people seek to benefit from low interest rates in the future is to choose a variable rate mortgage. This allows them to buy their home whenever they want, and the interest rate on their mortgage will do down as the market rates go down. Of course the down side of this method is that rates can go up as well.

Some banks try to attract customers toward buying high interest mortgages by offering incentives through their real estate agents, such as cash back or free electronics, but don't be fooled. Low interest is almost always better. Customers who have better credit histories can often qualify for lower interest rates than other customers, so if you want a low rate, manage your credit well.