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 request for a loan that includes the information about the potential borrower, the property and the requested loan that the solicited lender needs to make a decision. In a narrower sense, ...
An option exercised by the borrower, at the time of the loan application or later, to 'lock in' the rates and points prevailing in the market at that time. When lenders 'lock/' they ...
A letter from a lender verifying that the price and other terms of a loan have been locked. Borrowers who lock through a mortgage broker should always demand to see the lock commitment ...
The ratio of housing expense to borrower income. This ratio is one factor used in qualifying borrowers. ...
A mortgage lender or mortgage broker. ...
A borrower, usually refinancing rather than purchasing a home, who allows a lock to expire when interest rates go down in order to lock again at the lower rate. ...
A condominium project with features that lenders view as favorable in terms of their risk exposure on loans secured by individual condo units. The requirements of warrantability include ...
A mortgage that does not meet the purchase requirements of the two federal agencies, Fannie Mae and Freddie Mac, because it is too large or for other reasons, such as poor credit or ...
The period between payment changes on an ARM, which may or may not be the same as the interest rate adjustment period. ...
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