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
A condominium project with features that lenders view as favorable in terms of their risk exposure on loans secured by individual condo units. The requirements of warrantability include ...
A very large increase in the payment on an ARM that may surprise the borrower. The term is also used to refer to a large difference between the rent being paid by a first-time home buyer ...
A reverse mortgage program administered by FHA. ...
The amount invested in a house, equal to the sale price less the loan amount. The House Investment Decision: Lenders impose the upper limit on how much a household can spend for a house. ...
The period over which the interest due the lender is calculated. The interest accrual period may or may not correspond to the payment period. On the annual accrual mortgages in the UK, ...
A lender that sells the loans it originates, as opposed to a portfolio lender that holds them. ...
The minimum allowable ratio of down payment to sale price on any loan program. If the minimum is 10%, for example, it means that you must make a down payment of at least $10,000 on a ...
A multi-lender Web site that offered borrowers the capacity to shop among multiple competing lenders. ...
The method of financing used when a borrower contracts to have a house built, as opposed to purchasing a completed house. Construction can be financed in two ways. One way is to use two ...
Have a question or comment?
We're here to help.