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 documentation rule where the borrower discloses assets and their source but the lender does not verify the amount. ...
Same as term housing expense. The sum of the monthly mortgage payment, hazard insurance, property taxes, and homeowner association fees. Housing expense is sometimes referred to as PITI, ...
Charging unwary borrowers interest rates and/or fees that are excessive relative to what the same borrowers could have found had they shopped the market. ...
A lender offering loans on the Internet who provides mortgage shoppers with the information they need to make an informed decision before applying for a mortgage and guarantees them ...
A comprehensive and time-adjusted measure of loan cost to the borrower. IC on a Mortgage: IC is what economists call an 'internal rate or return.' It takes account of all payments made by ...
Making a payment larger than the fully amortizing payment as a way of retiring the loan before term. Making Extra Payments as an Investment: Suppose you add $100 to the scheduled ...
A mortgage on which the payment rises by a constant percent for a specified number of periods, after which it becomes fully-amortizing. ...
The specific interest rate series to which the interest rate on an ARM is tied, such as 'Treasury Constant Maturities, One-Year,' or 'Eleventh District Cost of Funds.' ...
A fee that some lenders charge to accept an application. It may or may not cover other costs such as a property appraisal or credit report, and it may or may not be refundable if the lender ...
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