Mortgage Rates For January 19, 2024: What Is Compound Interest?
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Mortgages aren’t as simple as they seem, especially for the first-time homebuyer or for someone who hasn’t applied for a home loan in decades. One of the more confusing aspects about applying for a home loan is compound interest on mortgages.
Compound interest usually occurs in mortgages when a person does not pay the interest on their loan. Without that payment on interest, the interest then gets added to the principal part of the loan. This means the loan ultimately takes more time to pay – and costs more money.
Today’s 30-year mortgage interest rates
The average daily mortgage interest rate for Friday, January 19, 2024 is 6.89% for a 30 year fixed rate. The rate rose 0.01% from yesterday and has risen 0.24% from December 2023. This information is sourced daily from correspondent, retail, and wholesale lenders located in the United States.
Today’s 15-year mortgage interest rates
The average daily mortgage interest rate for Friday, January 19, 2024 is 6.17% for a 15 year fixed rate. The rate rose 0.02% from yesterday and has risen 0.02% from December 2023. This information is sourced daily from correspondent, retail, and wholesale lenders located in the United States.
Calculating compound interest in mortgages
Compound interest considers the amount on the original loan and from interest you’ve already accrued. While it feels like a totally negative thing, and can be in terms of mortgages, it isn’t always. For example, if you have money in a savings account and there’s compound interest, you’re getting interest on your interest. In this way, you can use compound interest on investments and savings to compensate for any compound interest your lenders have applied to mortgages or other large loans.
For this reason, it’s important to read and understand how compound interest may impact your mortgage – as well as other substantial loans, like car loans. Because the compound interest can include past interest, you have to understand the loan terms when looking at an average daily mortgage interest rate.
Simple interest vs. compound interest
Simple interest works differently than compound interest. This means you’ll only owe (or accrue) interest on the original loan balance. Let’s say you have a bank account and you’ve accrued a percentage of interest. That money won’t count towards the accumulation of future interest – only the amount you’ve had in there already. For this reason, you may wish to consider a simple interest mortgage and a compound interest high-yield savings account.
