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Cap
A consumer safeguard limiting adjustments to ARM interest rate or mortgage payment's. |
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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. |
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Jumbo Loan
A loan which is larger than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Jumbo loans cannot be funded by these two agencies, and usually carry a higher interest rate. A loan which is larger than $322,700. |
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Points
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). |
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