Mortgage Price
Definition of "Mortgage Price"
The interest rate or rates and upfront fees paid to the lender and mortgage broker. Some upfront charges are expressed as a percent of the loan, and some are expressed in dollars. The price includes the total of each type. On a fixed-rate mortgage (FRM), one interest rate is preset for the life of the loan. On an adjustable rate mortgage (ARM), the rate is preset for an initial period, ranging from one month to 10 years, and then can change. For ARM shoppers who are uncertain about how long they will be in their house, the price includes ARM features that affect the ARM rate after the initial rate period ends. These include the margin, maximum rate, rate adjustment period, and rate adjustment caps. The margin is the amount that is added to the index used by the ARM in determining the rate after the initial rate period ends. In a stable interest rate environment, the ARM rate will become the index plus margin, called the 'fully indexed rate.' Both the index and the margin are specified in the ARM contract. The maximum rate is the highest rate permitted by the ARM contract. It tells shoppers how high the ARM rate can go in a rising rate environment. The rate adjustment period and rate adjustment caps indicate how often the rate is changed and the maximum amount of any change. Hence, they indicate whether any rate increases at the end of the initial rate period will be abrupt or gradual.
Popular Mortgage Terms
An interest rate index that is used on some ARMs. ...
The sum of all interest payments to date or over the life of the loan. This is not a good measure of the cost of credit to the borrower because it does not include upfront cash payments and ...
Limit on the size of payment change on an adjustable rate mortgage. ...
The number of months for which the initial interest rate holds on an ARM. ...
A mortgage on which the interest rate is adjustable based on an interest rate index, and the monthly payment adjusts based on a wage and salary index. Dual index mortgages are not written ...
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, ...
A charge imposed by the lender if the borrower pays off the loan early. The charge is usually expressed as a percent of the loan balance at the time of prepayment or a specified number of ...
Every ARM is tied to an interest rate index. An index has three relevant features:availibility, level, volatility. All the common ARM indexes are readily available from a published source, ...
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 ...
Have a question or comment?
We're here to help.