Definitions:
Loan amount - The total amount for
this loan.
Interest rate - The interest rate
on this loan.
Loan term - The number of years over
which you will repay this loan. The most common terms
are 15 years and 30 years. If this loan has a balloon
payment, this will be shorter than the number of years
to amortize the loan. For example, a loan with a 5 year
term amortized over 30 years will have the same monthly
payment as a 30 year loan with the same interest rate.
The difference is the 30 year loan will have equal payments
for 30 years. The 5 year loan will have equal payments
for 5 years and then a very large, or balloon, payment
for the remaining balance.
Amortization - The number of years
used in calculating the monthly payment. Loans that
are amortized over a longer period than their loan term
have a balloon payment. See "Loan term" for
more information.
Origination fee - The amount charged
as a loan origination fee which is included in the APR
calculation. For many loans a 1% origination fee is
common. For example, a 1% fee on a $120,000 loan would
cost $1,200.
Commitment fee - An upfront fee included
in the APR calculation.
Other fees - Any other fees that should
be included in the APR calculation. These fees can vary
by lender, but at a minimum usually includes prepaid
interest.
Other costs - Any other costs that
should be included in the APR calculation.
Monthly loan payment - Monthly principal
and interest payment (PI).
Annual percentage rate (APR) - A standard
calculation used by lenders. It is designed to help
borrowers compare different loan options. For example,
a loan with a lower stated interest rate may be a bad
value if its fees are too high. Likewise, a loan with
a higher stated rate with very low fees could be an
exceptional value. APR calculations incorporate these
fees into a single rate. You can then compare loans
with different fees, rates or different terms.
Balloon payment - This is the total
final payment for all loans that are amortized over
a period which is longer than the loan term. The balloon
payment is total interest and principal balance due
at the end of the loan term. (If the loan term is the
same as the amortization this amount is always zero.)
Loan Application
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