U.S. Mortgage Index

Interest

Definition

Interest is the cost charged for borrowing money. On a mortgage it is the dollar amount that accrues on the remaining principal. It is not the interest rate used to calculate that amount.

In plain English

The interest rate is a figure. Interest is what that figure produces: the charge for using the lender’s money over a period. A monthly payment typically covers that charge and may also reduce principal. Confusing the cost with the rate makes amortization and payoff quotes harder to read.

Technical definition

Fannie Mae’s consumer glossary supports interest as the charge for borrowing. The interest-rate page remains the rate concept. Freddie Mac Note Rate language describes the rate, not this amount.

Why it matters

Payment breakdowns, tax reporting, and amortization all speak about interest as an amount. The interest rate remains a separate idea.

Example

Alex’s statement shows interest charged for the month and a separate remaining principal. The charge is interest. The percentage used to compute it is the interest rate.

Commonly confused with

Sources reviewed

Important note

This page does not replace the existing Interest rate glossary entry.