When purchasing or refinancing, you’ll want to closely watch mortgage rates. Act quickly when the rates are low because even a quarter of a percent change can save or cost you thousands of dollars over the course of a mortgage loan.

As a home owner, there are several numbers that are important to your financial state of mind. Your monthly mortgage payment, your closing points, and your income tax deductions for the money paid on your mortgage rate’s interest. The rate of a mortgage is usually expressed as a percentage rate, and it’s like the interest rate you pay on a credit card. One of the critical skills for determining the efficacy of your current mortgage, and how much you’re going to be paying for it, is the Rule of 72.

The Rule of 72 is a common rule of thumb for calculating how much compound interest actually costs, and is used by financial institutions. In essence, take your mortgage rate in points, and divide 72 by it. This is the number of years it will take before your cumulative interest payments will match the amount of the original loan. If you’re paying 9% interest on a $100,000 mortgage, by the time you’ve made 8 years of mortgage payments, you’ll have paid around $100,000 in cumulative interest payments! This is one reason why lenders offer higher rates for shorter term mortgages.

It pays to shop around for mortgage rates, particularly if you picked up an adjustable rate mortgage a couple of years back. A lot of mortgages have low introductory fixed rates, and after two to five years in, kick up to a rate based on the Federal Reserve prime lending rate, and a lot of home owners and home buyers are discovering that their monthly mortgage payments are going up by 40 to 100% due to interest rates jumping from 3% to 8 or 9%, on a 30 year adjustable rate mortgage.

To get the best mortgage rates on a refinance of your house, you’ll want to compare mortgage rates and fees between multiple lenders and brokerage houses. In general, look for mortgages that don’t throw the closing fees into the loan balance – this is a common tactic to increase the size of your loan, by making your initial payment lower…and making you pay more money over the long term.


In general, fixed rate mortgages, particularly if you can get them now, while interest rates are low, are an excellent deal – even if it means taking on a 30 year payment plan rather than a 15 year mortgage. And when in doubt, ask lots of questions. This is your home, and your financial security you’re talking about. It pays to be well informed, both now, and in the long run.