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
A written document evidencing the lien on a property taken by a lender as security for the repayment of a loan. The term 'mortgage' or 'mortgage loan' is used loosely to refer both to the ...
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 ...
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 provision of the U.S. tax code that allows homeowners to deduct mortgage interest payments from income before computing taxes. Points and origination fees are also deductible, but not ...
A provision of a loan contract stipulating that if the property is sold the loan balance must be repaid. A mortgage containing a due-on-sale clause is not assumable. This prevents a home ...
To define a home equity line of credit, we can also take a look at how credit cards work. Similarly to credit cards, home equity lines of credit are sources of funds that can be accessed ...
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, ...
A rate lock, plus an option to reduce the rate if market interest rates decline during the lock period. ...
A computer-driven process for informing the loan applicant very quickly, sometimes within a few minutes, whether the application will be approved, denied, or forwarded to an underwriter. ...
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