If you think a 12% annual return on your money is good, here's the first time insider secret on HOW TO set your sights on 23% from your mortgage.

Mortgage interest rates are calculated on the basis of your monthly payments towards the loan. If you know basics of mortgage and how to calculate the interest rate, you can save some money on your mortgage.

You normally accept mortgage through a local bank or through a lender. But these banks and lenders do not set the mortgage interest rates. Federal Reserve Bank decides the interest rate. Lenders watch the interest rate on ten years bonds. When the yield on ten year bonds change, the interest rate will also change. For a home buyer, the mortgage interest rate depends on factors like closing costs, down payments etc.

There are different types of mortgages. For example, fixed rates mortgages are the one, where the interest rate and the payment will remain the same. In adjustable mortgage, monthly payment changes according to the interest rates.

Mortgage interest rates are also determined by the stock market. If the stock market goes up, the interest rate also goes up. If the stock market crashes, the interest rate will also come down. Another factor that determine the mortgage interest rate is your past credit history. Lender will check the past credit history and also risk of defaulting. If you have a good credit history and a secure job, you can obtain a loan for a fairly low interest rate. The higher the risk, the higher the interest rate will be.

The other factor that determining the mortgage rate by the banks are by loan to value ratio (ltv), by which the bank will give a certain percentage as loan to the actual value of the home. The bank will have less risk by putting more money on homes. In this case the interest rate will be low.

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