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Interest Rates. An interest rate is the price a borrower pays for the use of money he does not own, and the return a lender receives for deferring the use of funds, by lending it to the borrower. Interest rates are normally expressed as a percentage rate over the period of one year.

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## Interest Rates

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**Interest Rates**An interest rate is the price a borrower pays for the use of money he does not own, and the return a lender receives for deferring the use of funds, by lending it to the borrower. Interest rates are normally expressed as a percentage rate over the period of one year. Interest rates targets are also a vital tool of monetary policy and are used to control variables like investment, inflation, and unemployment.**Federal Funds Rate**• The federal funds rate is the interest rate at which private depository institutions (mostly banks) lend balances (federal funds) at the Federal Reserve to other depository institutions, usually overnight. Changing the target rate is one form of open market operations that the Chairman of the Federal Reserve uses to regulate the supply of money in the U.S. economy. • Prime rate, fed funds, COFI Updated 11/26/2008This week Month ago Year ago • Fed Funds Rate 1.00 1.50 4.50**Mortgage Interest Rates**• A mortgage is the transfer of an interest in property (or in law the equivalent - a charge) to a lender as a security for a debt - usually a loan of money. While a mortgage in itself is not a debt, it is lender's security for a debt. It is a transfer of an interest in land (or the equivalent), from the owner to the mortgage lender, on the condition that this interest will be returned to the owner of the real estate when the terms of the mortgage have been satisfied or performed. In other words, the mortgage is a security for the loan that the lender makes to the borrower. • The difference between 15 and 30 year mortgages is that you pay more per month in a 15 year mortgage than a 30 year mortgage. But in the long run, you actually save money using a 15 year mortgage because they have lower interest and you pay it off in half the amount of time. The difference of 15 years makes a huge difference in the amount paid, as the 30 year mortgage has twice the amount of time to keep building up interest. 15 Year Fixed Rate at 5.50% • $150,000 Loan Amount • Monthly principal and interest payment: $1,225.63 • Total interest paid over the life of the loan: $70,612.53 • Average monthly interest paid over the life of the loan: $196.15 • 30 Year Fixed at 5.75% • $150,000 Loan Amount • Monthly principal and interest payment: $875.36 • Total interest paid over the life of the loan: $165,129.34 • Average monthly interest paid over the life of the loan: $458.69 • Total interest saved by choosing a 15 Year Fixed Mortgage: $94,516.81**Average mortgage rates and points in the top 10 markets**• Fixed 15-year Fixed 30-year 5-year ARM • Market Rate / Points Rate / Points Rate / Points • New York Metro 6.50 / 0.32 6.78 / 0.21 6.91 / 0.39 • Los Angeles 6.42 / 0.76 6.68 / 0.72 6.49 / 0.64 • Chicago 6.52 / 0.19 6.84 / 0.21 6.48 / 0.44 • San Francisco 6.40 / 0.61 6.73 / 0.59 6.60 / 0.49 • Philadelphia 6.58 / 0.21 6.89 / 0.27 6.89 / 0.37 • Detroit 6.54 / 0.21 6.78 / 0.15 6.53 / 0.36 • Boston 6.37 / 0.09 6.70 / 0.00 6.59 / 0.14 • Houston 6.44 / 0.87 6.84 / 0.73 6.88 / 0.85 • Dallas 6.39 / 0.70 6.71 / 0.61 6.65 / 0.71 • DC Metro 6.41 / 0.44 6.76 / 0.41 6.72 / 0.67

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