Interest Rate
Quick Summary
The percentage cost charged for borrowing money, usually quoted per year.
ELI5 Explanation
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It’s the price tag on the loan — higher rate means you pay more to borrow.
Detailed Explanation
Mortgage rates are typically quoted as an annual percentage. Your actual monthly cost depends on rate, balance, and payment structure (interest-only vs amortizing). In private lending, the headline rate is only part of the cost — fees and penalties can materially change the effective borrowing cost.
Example
A $500,000 interest-only loan at 10% costs about $4,167 per month in interest (before fees).
Why It Matters
Rate drives monthly carrying cost and influences how realistic your exit strategy is.