The interest rate your lender gives you isn't the true cost of your mortgage. Learn how to calculate your effective interest rate, including any discount points.

Effective Interest Rate = (1 + (6% / 12))^(12) - 1 ≈ 6.17%. This rate reflects the true cost of borrowing, accounting for monthly compounding. The real rate includes the inflation rate.

Everybody knows what an interest rate is—it’s effectively a percentage of an amount over a year. If your savings account earns you a 0.05% interest per year (which is a really terrible ...