Rate Protection
Definition of "Rate Protection"
Protection for a borrower against the danger that rates will rise between the time the borrower applies for a loan and the time the loan closes. Rate protection can take the form of a lock, where the rate and points are frozen at their initial levels until the loan closes, or a float-down, where the rates and points cannot rise from their initial levels but they can decline if market rates decline. In either case, the protection only runs for a specified period. If the loan is not closed within that period, the protection expires and the borrower will have to either accept the terms quoted by the lender on new loans at that time or start the shopping process anew.
Popular Mortgage Terms
The interest rate adjusted for intra-year compounding. Because interest on a mortgage is calculated monthly, a 6% mortgage actually has a rate of .5% per month. If there were no principal ...
The house in which the borrower will live most of the time, as distinct from a second home or an investor property that will be rented. ...
A borrower who submits applications through two loan providers, usually mortgage brokers, without their knowledge. Home purchasers sometimes submit more than one loan application as a way ...
The period you must retain a mortgage in order for it to be profitable to pay points to reduce the rate. ...
The highest rate possible under an ARM contract; same as 'lifetime cap.' It is often expressed as a specified number of percentage points above the initial interest rate. ...
The upfront and/or periodic charges that the borrower pays for mortgage insurance. There are different mortgage insurance plans with differing combinations of monthly, annual, and upfront ...
A reverse mortgage program administered by FHA. ...
The lowest interest rate possible under an ARM contract. Floors are less common than ceilings. ...
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 ...
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