Effective Rate
The interest rate adjusted for intra-year compounding. Because interest on a mortgage is calculated monthly, a 6% mortgage actually has a rate of .5% per month. If there were no principal repayments the first year, $100 invested in a 6% mortgage would actually earn $6.17 of interest during the year because of reinvestment of monthly interest. The 'effective rate' is thus 6.17%, while 6% is termed the 'nominal' rate. Similarly, a 6% bond on which interest is paid quarterly has an effective rate of 6.14%.
Popular Mortgage Terms
Prices that assume a more or less standardized set of transaction characteristics that generally command the lowest prices. Generic prices are distinguished from transaction specific ...
Adjustable rate mortgages on which the interest rate is mechanically determined based on the value of an interest rate index. Indexed ARMs are distinguished from Discretionary ARMs, in that ...
A mortgage on which interest is calculated daily based on the balance on the day of payment, rather than monthly, as on the standard mortgage. ...
The definition of a foreclosure bailout loan: a secured loan obtained by a mortgagor in order to save an owner-occupied house that is under foreclosure. It is a refinancing loan and it ...
A mortgage on which half the monthly payment is paid every two weeks. This results in 26 payments per year, which is the equivalent of 13 monthly payments rather than 12. Because of the ...
An upfront cash payment required by the lender as part of the charge for the loan, expressed as a percent of the loan amount; e.g., '3 points' means a charge equal to 3% of the loan ...
The largest loan size permitted on a particular loan program. For programs where the loan is targeted for sale to Fannie Mae or Freddie Mac, the maximum will be the largest loan ...
Requirements stipulated by the lender that the ratio of housing expense to borrower income and the ratio of housing expense plus other debt service to borrower income cannot exceed ...
A documentation rule where the borrower discloses assets and their source but the lender does not verify the amount. ...
Have a question or comment?
We're here to help.