Chapter 18 Flashcards
A loan whose interest rate is periodically adjusted based on the current interest rate environment
Adjustable-Rate Mortgages
A table showing the breakdown of principal and interest paid over the life of a mortgage
Amortization Schedule
A loan whose balance is gradually retired by periodic payments
Amortizing Loans
A lump sum payment due on a specified date in the future
Balloon Payments
1 percent of the loan amount
Discount Points
The actual cost of borrowed funds expressed as an interest rate
Effective Interest Rate
A loan with a fixed interest rate over the loan term
Fixed-Rate Mortgage
A nonamortizing loan that requires periodic payments of interest and a single balloon payment of the principal at the end of the loan term
Interest-Only Loan
Fees charged by lenders in the origination process
Origination Fees
Early repayment of principal
Prepayment
The process of obtaining a new loan and using the proceeds to repay an existing loan
Refinancing
A loan whose interest rate is adjusted once during the term of the loan
Two-Step Mortgages
