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
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: ...
Same as term Interest Rate: The rate charged the borrower each period for the loan of money, by custom quoted on an annual basis. A mortgage interest rate is a rate on a loan secured by a ...
The payment of principal and interest made by the borrower. ...
The definition of credit risk is at the core of lending. Banks lend money to businesses and individuals and expect to recover the principal and win interest. Banks offer a variety of loans, ...
On an ARM, the assumption that the interest rate rises to the maximum extent permitted by the loan contract. ...
A mortgage on which all settlement costs except per diem interest and escrows are paid by the lender and/or the home seller. A no-cost mortgage should be distinguished from a ...
The option to convert an ARM to an FRM at some point during its life. ...
The number of months for which the initial interest rate holds on an ARM. ...
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, ...
Have a question or comment?
We're here to help.