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
Housing expense plus current debt service payments. ...
Protection for a borrower against the danger that rates will rise between the time the borrower applies for a loan and the time the loan closes. Rate protection can take the form of a ...
On an ARM, the assumption that the interest rate rises to the maximum extent permitted by the loan contract. ...
The interest rate used in calculating the initial mortgage payment in qualifying a borrower. The rate used in qualifying borrowers may or may not be the initial rate on the mortgage. On ...
A loan eligible for purchase by the two major federal agencies that buy mortgages, Fannie Mae and Freddie Mac. Conforming mortgages cannot exceed a legal maximum amount, which was $322,700 ...
A non-citizen with a green card employed in the U.S. Non-permanent resident aliens are subject to somewhat more restrictive qualification requirements than U.S. citizens. Permanent ...
A Web site of an individual lender offering loans to consumers. Most Internet shoppers want a list of lenders in whom they can have confidence, who will provide them with the information ...
A payment made by the borrower over and above the scheduled mortgage payment. If the additional payment pays off the entire balance it is a prepayment in full; otherwise, it is a partial ...
The sum of the monthly mortgage payment, hazard insurance, property taxes, and homeowner association fees. Housing expense is sometimes referred to as PITI, standing for principal, ...
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