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Canadian Financial, Real Estate and Mortgage Glossary
How often this word is used
76% - Very Often
76% - Very Often
|Synonyms:||lending rate, percentage rate|
|Filed Under:||financial-banking, investments, mortgages|
|Tags:||economics, lending, mortgage, rates|
Definition of interest rate (IR)
- interest rate (IR)
- 1. The rate at which interest is applied to the money borrowed from a lender. Interest rates are expressed as a percentage of principal, most commonly on an annual basis, which is known as the annual percentage rate (APR). As a general rule of thumb, the higher the risk the investment poses, the higher the interest rate the borrower will pay. The inverse is equally true.
Related Terms and Acronyms:
annual percentage rate (APR)
A yearly rate of interest that includes fees and costs paid to acquire the loan. Lenders are required by law to disclose the APR. The rate is calculated in a standard way, taking the average compound interest rate over the term of the loan, so borrowers can compare loans. In mortgages, it is the interest rate of a mortgage when taking into account the interest, mortgage insurance, and certain closing costs including points paid at closing. There is no APR in an automobile lease; instead, the cost of money is expressed as the money factor.
➥ A number used to compare costs associated with mortgage loans and other forms of financing.
- fixed rate mortgage (FRM) A loan in which the interest rate and payments remain the same for the entire life of the loan. The interest rate and payment amounts are set at the time of loan origination.
- interest rate differential (IRD) The penalty one pays for breaking a mortgage.
- mortgage (mtg) A mortgage is a contract stipulating a specific real property, typically a residence or building, as collateral for a loan. The mortgage incurs a rate of interest that varies according to term and other features.
A program that calculates the costs involved in a mortgage or determines what kind of mortgage a person can qualify for.
➥ CanEquity's mortgage calculator has been rated number one by the Globe and Mail.
The interest rate on a mortgage loan.
➥ You can compare mortgage rates using this website by clicking 'Rates' above.
prime lending rate (PLR)
The rate of interest charged on loans by chartered banks to their most creditworthy customers.
➥ Bank of Canada's prime (best) lending rate.
- simple interest (SI) Interest computed only on the principal balance, without compounding.
- step-rate mortgage A fixed-rate home loan on which payments are lower at the beginning, typically for two years, and which then rise.
variable rate mortgage (VRM)
Home loan in which the interest rate is changed periodically based on a standard financial index. Also called an "Adjustable-rate Mortgage."
➥ A type of mortgage loan offered by brokers and lenders.
More Related Terms and Acronyms
- amortization — Definition
- index — Definition
- initial interest rate — Definition
- interest adjustment date — Definition
- original principal balance — Definition
- origination date — Definition
- origination fee — Definition
- per diem interest — Definition
- periodic rate — Definition
- periodic rate cap — Definition
- point — Definition
- pre-computed loan — Definition
- pre-paid interest — Definition
- prime rate — Definition
- principal — Definition
- private lender — Definition
- qualifying rate — Definition
- rate — Definition
- rate hold — Definition
- roll in loans — Definition
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