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14 Cards in this Set
- Front
- Back
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Real Rate of Interest
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The minimum rate of interest that must be earned by savers to induce them to divert the use of resources from present consumption to future consumption.
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Nominal Interest Rate
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The contract interest rate agreed on by borrowers and lenders.
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Default Risk
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Risk that borrowers will default on obligations to repay interest and principal.
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Interest Rate Risk
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The risk that goes along with the uncertainty of interest rates during the life of the loan.
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Prepayment Risk
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The risk that the loan will be repaid when interest rates fall below the loan contract rate.
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Legislative Risk
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Refers to changes in the regulatory environment in which markets operate.
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Liquidity Risk
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Securities that can be easily sold and resold in well-established markets will require lower premiums than those that are more difficult to sell.
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Accrual Rate (i/12)
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The amount of interest accrued and owed to the lender at the end of the month.
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Pay Rate
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The ratio of payments to the loan amount.
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Amortization
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The process of loan repayment over time.
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Loan Origination Fees
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Fees intended to cover expenses incurred by the lender for processing and underwriting loan applications, preparation of loan documentation and amortization schedules, obtaining credit reports, and any other expenses that the lender believes should be recovered from the borrower.
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Loan Closing Costs
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Loan fees that are incurred in many types of real estate financing.
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Loan Discount Fees (Points)
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Adjust the yield on a mortgage loan.
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Loan Structuring
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A process of adjusting loan terms to calibrate loan payments, loan balances, amortization rates and so on, to achieve desired results.
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