No matter whether it is for a mortgage, refinancing, a second mortgage (either for a home equity loan or a home equity line of credit) or for debt consolidation, there is almost always going to be an interest fee involved.

That fee is determined by an interest rate, which most simply is a percentage of the original loan amount (or principal). Usually, that rate is described as an annual interest rate.

For example, an "eight percent loan" means that over the course of a year, the borrower will pay an additional eight percent of the remaining principal.

When use in regards to house-related loans, interest rates are also sometimes referred to as mortgage rates.

Banks, credit unions, and other mortgage lenders determine the rates at which they lend money, however, that rate is often influenced by how much they paid to borrow it in the first place. Like a person that borrows money for a mortgage, lenders pay interest for the money they borrow for lending.

In the United States, that rate (known as the prime rate) is determined by the Federal Reserve Bank. Therefore, the rates lenders charge will almost always be higher than what the Federal Reserve charges.

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