The rate used to amortize the mortgage loan and determine the monthly payments is known as what?

The term that describes the rate used to amortize the mortgage loan and determine the monthly payments is known as the Note Rate. This rate is explicitly stated in the promissory note and reflects the true cost of borrowing over the life of the loan. It directly informs borrowers of the percentage they will pay in interest on their outstanding balance, which is crucial for calculating monthly payments and understanding the total cost of the mortgage.

While the interest rate is a broader term that encompasses various types of rates in finance, the Note Rate specifically refers to the rate associated with a particular mortgage contract and is the foundation for calculating the amortization schedule. The effective rate can involve different considerations such as fees and compounding, which may not directly correlate to the basic amortization calculations. Market rate refers to the going rate in the market for loans at a given time, but it doesn't specifically define the rate that will be used for amortization on an individual loan agreement.