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 particular combination of loan, borrower, property, and transaction characteristics that lenders use in setting prices and underwriting requirements. ...
A mortgage on which interest is calculated daily based on the balance on the day of payment, rather than monthly, as on the standard mortgage. ...
Same as term Points: An upfront cash payment required by the lender as part of the charge for the loan, expressed as a percent of the loan amount; e.g., '3 points' means a charge equal to ...
A document that evidences a debt and a promise to repay. A mortgage loan transaction always includes a note evidencing the debt, and a mortgage evidencing the lien on the property. ...
A second mortgage on a property that is not paid off when the first mortgage is refinanced. The second mortgage lender must allow subordination of the second to the new first mortgage. ...
A loan eligible for purchase by the two major federal agencies that buy mortgages, Fannie Mae and Freddie Mac. Conforming mortgages cannot exceed a legal maximum amount, which was $322,700 ...
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 ...
A collateralized debt obligation, also known as CDO, defines a complex financial product. Various loans, mortgages, bonds, and valuables back this commodity, and institutional investors ...
Adjustable rate mortgages on which the interest rate is mechanically determined based on the value of an interest rate index. Indexed ARMs are distinguished from Discretionary ARMs, in that ...
Have a question or comment?
We're here to help.