Simple Interest
Definition of "Simple Interest"
A transaction in which interest is not paid on interest there is no compounding. For example, if you deposit $1,000 in an account that pays 5% a year simple interest, you would receive $50 interest in year one and another $50 in year two. If interest were compounded annually, you would receive $52.50 in year two. All deposit accounts compound interest, however, because if they didn't, depositors would shuffle accounts between banks. In my example, you could withdraw the $1050 at the end of year one, put it into another bank, and earn $52.50 in year two.
Popular Mortgage Terms
A payment made by the borrower over and above the scheduled mortgage payment. If the additional payment pays off the entire balance it is a prepayment in full; otherwise, it is a partial ...
The payment of principal and interest made by the borrower. ...
The period you must retain a mortgage in order for it to be profitable to pay points to reduce the rate. ...
A contribution to a borrower's down payment or settlement costs made by a home seller, as an alternative to a price reduction. ...
A borrower who doesn't pay. ...
Total costs charged to the borrower that must be paid at closing, by the borrower, the home seller, or the lender. In dealing directly with a lender, settlement costs can be divided into ...
The month in which a zero loan balance is reached. The payoff month may or may not be the loan term. ...
Interest that is earned but not paid, adding to the amount owed. For example, if the monthly interest due on a loan is $600 and the borrower pays only $500, $100 is added to the amount owed ...
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 ...
Have a question or comment?
We're here to help.