Interest Cost (IC)
Definition of "Interest Cost (IC)"
A comprehensive and time-adjusted measure of loan cost to the borrower. IC on a Mortgage: IC is what economists call an 'internal rate or return.' It takes account of all payments made by the borrower over the life of the loan relative to the cash received up front. On a mortgage, the cash received up front is the loan amount less all upfront fees paid by the borrower. On an ARM, IC captures the effect of interest rate changes on the monthly payment and the balance, but future rate changes must be assumed. IC Versus APR: IC differs from APR in the following ways: IC is measured over any time horizon, whereas APR assumes that all loans run to term. IC may be measured after taxes whereas APR is always measured before taxes. On an ARM, IC can be calculated on any interest rate scenario whereas APR always uses a no-change scenario.
Popular Mortgage Terms
Employees of lenders or mortgage brokers who find borrowers, sell and counsel them, and take applications. Loan officers employed by mortgage brokers may also be involved in loan ...
A lender that provides loans through mortgage brokers or correspondents. ...
The total cash required of the home buyer/borrower to close the purchase plus loan transaction or the loan transaction on a refinance. Required cash includes the down payment, points and ...
A lender who offers mortgage loans directly to the public. ...
The initial interest rate on an ARM, when it is below the fully indexed rate. ...
The portion of the monthly payment that is used to reduce the loan balance. ...
A clause in the note that allows the lender to demand repayment of the balance in full. A demand clause is even better (for the lender) than an acceleration clause. An acceleration clause ...
On an ARM, the assumption that the value of the index to which the interest rate is tied does not change from its initial level. ...
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 ...
Have a question or comment?
We're here to help.