What is an “adjustment interval”? This is the time between changes in the interest rate and/or the monthly payment on an adjustable rate mortgage.
What is “amortization”? Amortization is the division of principal and total interest charges into equal payments that will result in the complete payment of the debt by the end of a fixed period of time. The lower the rate the faster the principal balance will decrease in the first years of the loan. What are “points”? Points (sometimes called “loan discount points”) are pre-paid interest on your mortgage, charged at closing. Each point is equal to 1% of the mortgage amount. If you plan to stay in a home for more than 4 or 5 years and prefer a fixed rate loan, it is a good idea to consider “buying” your rate lower. I would be happy to help you understand this concept in more detail. What does “APR” stand for? This stands for Annual Percentage Rate and reflects the annual cost of the mortgage, taking into account “points” and other credit costs. The APR can be used to compare the annual cost of different types of mortgage loans, but be careful.
top What is “amortization?” The gradual elimination of a liability, such as a mortgage, in regular payments over a specified period of time. Such payments must be sufficient to cover both principal and interest or the loan will become negative amortizing, principal balance goes up instead of down. Principal is the amount borrowed, or the part of the amount borrowed which remains unpaid (excluding interest). The principal part of the monthly payment reduces the unpaid balance. Interest is the fee charged by a lender to a borrower for the use of borrowed money, usually expressed as an annual percentage of the principal; the rate is dependent upon the time value of money, the credit risk of the borrower. top What are “discount points?” Discount points are pre-paid interest on your mortgage, charged up-front at the time of closing. One point is equal to one-percent of the loan amount. Paying discount points upfront will lower the interest rate over the term of the loan.
Related Questions
- What is an "adjustment interval"? This is the time between changes in the interest rate and/or the monthly payment on an adjustable rate mortgage.
- Can some credit counseling agencies get a lower interest rate or payment than others?
- What is the latest time that I can make changes to a scheduled payment?
