Interest Cost (IC)
Definition of "Interest Cost (IC)"
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 the borrower over the life of the loan relative to the cash received up front. On a mortgage, the cash received up front is the loan amount less all upfront fees paid by the borrower. On an ARM, IC captures the effect of interest rate changes on the monthly payment and the balance, but future rate changes must be assumed. IC Versus APR: IC differs from APR in the following ways: IC is measured over any time horizon, whereas APR assumes that all loans run to term. IC may be measured after taxes whereas APR is always measured before taxes. On an ARM, IC can be calculated on any interest rate scenario whereas APR always uses a no-change scenario.
Popular Mortgage Terms
The policy of a second mortgage lender toward allowing a borrower to refinance the first mortgage while leaving the second in place. ...
Advice on where to go to get a mortgage. A borrower can always select a loan provider by throwing a dart at the Yellow Pages. A referral is of value if it raises the probability of a ...
The option to convert an ARM to an FRM at some point during its life. ...
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 ...
Housing expense plus current debt service payments. ...
A particular computerized system for doing automated underwriting. Mortgage insurers and some large lenders have developed such systems, but the most widely used are Fannie Mae's 'Desktop ...
The array of laws and regulations dictating the information that must be disclosed to mortgage borrowers, and the method and timing of disclosure. ...
Authorization by the lender for the borrower to pay taxes and insurance directly. This is in contrast to the standard procedure, where the lender adds a charge to the monthly mortgage ...
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 ...
Have a question or comment?
We're here to help.