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
Programs offered by some lenders under which a borrower who is able to secure a grant or gift equal to 2% of the down payment will only have to provide a 3% down payment from their own ...
A lender that sells the loans it originates, as opposed to a portfolio lender that holds them. ...
Same as term housing expense. The sum of the monthly mortgage payment, hazard insurance, property taxes, and homeowner association fees. Housing expense is sometimes referred to as PITI, ...
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 ...
The process of raising cash periodically through successive cash-out refinancings. This is a scam initiated by mortgage brokers that victimizes wholesale lenders, with the connivance of ...
The form that lists the settlement charges the borrower must pay at closing, which the lender is obliged to provide the borrower within three business days of receiving the loan application. ...
A federal agency that guarantees mortgage securities that are issued against pools of FHA and VA mortgages. ...
The sum of all interest payments to date or over the life of the loan. This is an incomplete measure of the cost of credit to the borrower because it does not include upfront cash ...
Points paid by a lender for a loan with a rate above the rate on a zero point loan. For example, a lender might quote the following prices: 8%/0 points, 7.5%/3 points, 8.75%/-2.5 points. ...
Have a question or comment?
We're here to help.