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 party advancing money to a borrower at the closing table in exchange for a note evidencing the borrowers debt and obligation to repay. Retail, Wholesale, and Correspondent Lenders: ...
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, ...
The lender's risk that, between the time a lock commitment is given to the borrower and the time the loan is closed, interest rates will rise and the lender will take a loss on selling ...
A mortgage lender that sells all the loans it originates in the secondary market. ...
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 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, ...
The amount the borrower promises to repay, as set forth in the loan contract. The loan amount may exceed the original amount requested by the borrower if he or she elects to include ...
A variety of unsavory lender practices designed to take advantage of unwary borrowers. Predatory lending covers much the same ground as Mortgage Scams and Tricks/Scams by Loan Providers. ...
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 ...
Have a question or comment?
We're here to help.