Below market interest rate

Below market interest rate means any interest rate that is less than the prevailing interest rate in the market. Below market interest rates are usually applied to government programs, such as housing programs, with the intent of helping borrowers incapable of paying loans with a higher interest rate be able to acquire one at a reasonable cost.

Due to the purpose of programs that make below market interest rate loans possible, there is always a limit set for the household income of any person that would apply for such a loan. The limit is set to cover only those that belong to low and mid-income households. Usually the limit is set to just below the median income of the surrounding community where the loan is to be taken.

Another limit usually set for below market interest rate programs are the number of properties that a person can own. This includes properties that are accumulated throughout the years from old purchases as well as any gift and inheritances. This is to ensure that only those that currently need the loan most will be accommodated.

For housing programs that allow people to purchase at below market interest rates additional stipulations are also put in place. Two of the main conditions are that the owner of the house should be the one to reside in the house and that if the house is to be sold it should also be sold via a similar, if not the same, program.