The mortgage interest rate is the percentage you pay on the amount you borrow to finance your home. This rate has a big impact on your monthly payments and how much you repay in total to the lender. It's important to understand how mortgage interest works and what options you have.

The rate you pay depends on several factors:

• Market interest rate: If the market rate goes up, mortgages usually become more expensive.
• Fixed-rate period: If you fix the rate period for a longer time, the rate is often higher. The cause of this is because banks are taking on more risk that market rates will rise in the future.
• Loan-to-value (LTV): The ratio between your mortgage and home's value. A smaller loan compared to the home's value means a lower rate.
• Type of mortgage: Some mortgages have different rates.

When you take out your mortgage, you choose whether to fix your rate for a set period or to go with a variable rate that changes over time.

• Fixed rate: Your interest rate stays the same during the agreed period. You have certainty about your monthly payments.
• Variable rate: The rate is adjusted regularly to reflect market rates. If the rates drop, your payments can go down. It works the other way around as well.

Most people choose a long fixed-rate period because it provides more peace of mind and predictability.

Impact on your monthly payments

The interest rate determines how much you pay each month in addition to your loan repayment. If the rate is higher, your monthly costs will be higher. That's why it's recommended to compare different lenders and fixed-rate periods.

Part of the mortgage interest you pay can be deducted from your taxable income. This provides a tax benefit, which lowers your net monthly payments. However, there are conditions:

• You only qualify if you use the loan to finance your main residence.
• You must repay the loan with an annuity or linear mortgage.
• If you have an interest-only mortgage, you cannot get a mortgage interest deduction.