An interest only mortgage is a home loan allows a borrower to only make payments toward interest due without any portion towards the principal for a specified period of time within the term.
This is often an option attached to mortgages.
For example, if a home loan has a monthly payment of $500 consisting of $400 interest and $100 principal, then an interest only loan would only require the borrower to make a payment of $400.
Overage is the positive difference between the price a loan officer charges a borrower and the priced posted by the lender to the officer.
It goes without saying that loan officer on the front line are constantly being updated with the prices of home loan that they are selling to consumers.
While they would already by making commissions on these standard rates, they would inevitably be remunerated with more commissions should they be able to convince a borrower to pay more than the posted rate.
The prime rate or prime lending rate is an internal benchmark rate used by a lender, particularly commercial banks.
In theory, different lenders can have varying prime rates as they are computed internally.
But in practice, the prime interest rate of different lenders tend to have little variance as it is heavily based on the federal funds rate.
The initial interest rate refers to the interest rate of a mortgage during it’s first few months or years after the commencement.
This period of initial interest rate is referred to as the initial rate period.
During which interest rate can either be an index rate plus a margin or a fixed rate.