If a mortgage company offers you a 30-year fixed interest rate of 5.50%, when do you begin paying 5.50% interest on the money that you borrow? Your answer to the above question would probably be, "As soon as I make my first payment."

Unfortunately, you would be incorrect. But this is a common misconception. In fact, the one and only time that one would pay 5.50% on a 30-year, fixed rate mortgage at that rate would be in month 360. That is the only time in which your effective interest rate - the true cost of money over a fixed period of time - is equal to the interest rate on your Note.

So, what exactly does this mean? Not all that much if you are planning on making 360 monthly mortgage payments over the next 30 years to pay off your home loan. If, however, you consider that the average American holds his or her home loan for only 5 years due to either refinance or sale, this information is quite powerful.

Let's assume, for a moment, that you are like tens of millions of other American homeowners and will hold your mortgage for 5 years. Let's also assume that you have a 30-year, fixed-rate mortgage at 5.50% in the amount of $400,000.

Loan Amount = $400,000

Interest Rate = 5.50%

Monthly Payment of Principal & Interest = $2,271

Total Annual Payments = $27,252

Total Payments After 5 Years = $136,260

Mortgage Balance After 5 Years = $369,848

Non-Retrievable Interest Paid to Bank = $106,102

Total Equity Gained in 5 Yeats = $30,158

Rate of Interest Paid if Pay Off After 5 Years = 89.14%

As you can see, if you are like most Americans and pay off a loan in 5-years - even if it is at a low interest rate of 5.50% - the effective rate of interest that you would pay on your loan would be almost 90%. And in 5 years of making payments totaling over $136,000, you would gain only $30,000 in equity, with the remaining $106,000 having gone into the bank's pocket.

If you are among the millions of American homeowners who remain in a loan for an average of 5 years, you should be far more concerned with your monthly payment than your rate of interest. Ask yourself this question: When you make your mortgage payment each month, do you write your interest rate or your monthly payment on the check? Interest rates are, without a doubt, important. But very often, the mortgage program that you are in trumps the mortgage interest rate that you obtain. This is certainly not meant to discourage consumers from seeking the lowest possible 30-year fixed rate. It is merely to raise awareness that there are other considerations.