Mortgage Price
Definition of "Mortgage Price"
The interest rate or rates and upfront fees paid to the lender and mortgage broker. Some upfront charges are expressed as a percent of the loan, and some are expressed in dollars. The price includes the total of each type. On a fixed-rate mortgage (FRM), one interest rate is preset for the life of the loan. On an adjustable rate mortgage (ARM), the rate is preset for an initial period, ranging from one month to 10 years, and then can change. For ARM shoppers who are uncertain about how long they will be in their house, the price includes ARM features that affect the ARM rate after the initial rate period ends. These include the margin, maximum rate, rate adjustment period, and rate adjustment caps. The margin is the amount that is added to the index used by the ARM in determining the rate after the initial rate period ends. In a stable interest rate environment, the ARM rate will become the index plus margin, called the 'fully indexed rate.' Both the index and the margin are specified in the ARM contract. The maximum rate is the highest rate permitted by the ARM contract. It tells shoppers how high the ARM rate can go in a rising rate environment. The rate adjustment period and rate adjustment caps indicate how often the rate is changed and the maximum amount of any change. Hence, they indicate whether any rate increases at the end of the initial rate period will be abrupt or gradual.
Popular Mortgage Terms
A payment made by a lender to a mortgage broker for delivering an above-par loan. A par loan is one on which the lender charges zero points. Lenders charge points on loans carrying ...
Allowing the interest rate and points to vary with changes in market conditions, as opposed to 'locking' them. Floating may be mandatory until the lender's lock requirements have been met. ...
A written document evidencing the lien on a property taken by a lender as security for the repayment of a loan. The term 'mortgage' or 'mortgage loan' is used loosely to refer both to the ...
The interest rate used to calculate the mortgage payment. The interest rate and the payment rate are often the same, but they need not be. They must be the same if the payment is fully ...
The most recently published value of the index used to adjust the interest rate on an indexed ARM. ...
The policy of a second mortgage lender toward allowing a borrower to refinance the first mortgage while leaving the second in place. ...
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 3% of the loan ...
A letter from a lender verifying that the price and other terms of a loan have been locked. Borrowers who lock through a mortgage broker should always demand to see the lock commitment ...
To define a home equity line of credit, we can also take a look at how credit cards work. Similarly to credit cards, home equity lines of credit are sources of funds that can be accessed ...
Have a question or comment?
We're here to help.