|Cash Out Refinance|
A mortgage loan that allows the borrower to pay off an existing debt and obtain excess money from the equity of their home for payment of closing costs and additional funds for personal needs (i.e., college tuition, home improvement, remodel home, purchase automobile and etc).
|Effective interest rate|
The effective interest rate is the mortgage cost on a yearly basis expressed as a percentage includes charges paid when closing the loan including compounded interest. Higher closing costs or more frequent compounding result in a higher effective interest rate.
|Monthly Housing Payment|
Typically the total amount of principal, interest, taxes, and insurance (PITI) paid each month on a mortgage loan. Many lenders and investors limit the monthly housing payment to 28% of the gross monthly income.
Points are also called discount points, mortgage points, loan discount points, loan origination fees, or maximum loan charges. Points are prepaid interest assessed at closing by the lender and or the broker. A point is equal to 1 percent of the loan amount. Lenders consider mortgage points as interest that you pay in advance. As a result, the more points you pay when you close the loan, the lower your interest rate. The IRS considers points to be a form of prepaid interest. Discount fees are totally tax deductible for the year the loan is closed for tax purposes, while origination points are tax deductible over two years (half for the year the loan is closed, and half in the year following).