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
A borrower with the best credit rating, deserving of the lowest prices that lenders offer. ...
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Fixed rate Mortgage is a type of loan that maintains a specified interest rate for the lifetime (or maturity) of the mortgage.According to the Federal National Mortgage Association, ...
Limit on the size of payment change on an adjustable rate mortgage. ...
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Having the builder borrow the money needed for construction. ...
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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 ...
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 ...
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