What is the percentage rate at which interest accumulates on a mortgage, typically used to determine monthly payments?

The percentage rate at which interest accumulates on a mortgage and is typically used to determine monthly payments is known as the Interest Accrual Rate. This rate reflects the cost of borrowing over the term of the loan, affecting the amount of interest that will be applied to the outstanding balance of the mortgage.

Mortgages are structured so that payments often cover both principal and interest calculated based on this accumulation rate. Understanding this concept is crucial for borrowers, as it directly influences their monthly payment amounts and the total cost of the mortgage over its duration.

The other choices refer to different concepts related to finance and lending. The Effective Rate considers the impact of compounding on interest, which isn’t typically used in calculating the straightforward monthly obligations of a mortgage but may apply in other financial contexts. The Annual Percentage Rate (APR) incorporates both the interest rate and any additional costs associated with obtaining the loan, offering a broader view of the cost of borrowing over a year, but does not specifically define the rate at which interest accrues monthly. Meanwhile, the Discount Rate relates to the present value of future cash flows and is not a rate at which interest accumulates on a specific loan type like a mortgage.