- Early repayment charge
If fixed rate
mortgages(FRM) are noticed in advance a compensation the so-called "early repayment charge" or "redemption penalty" has to be paid.If the interest rates have fallen, the creditor has an interest loss due to the notice. But if the rates are higher the creditor will gladly accept the early repayment or will even grant the compensation. The height of the compensation depends on the difference of the current rate to the rate of the loan and the period where the fixed rate is applied.Mathematical the early repayment charge is the net present valueof all outstanding payments at the current interest rate minus the actual debt.
Lenders generally require borrowers to sign a form that they have been notified of an early repayment charge. Borrowers generally agree to a loan with such a stipulation to get better rates. Lenders prefer this because it gives them a guarantee for a certain amount of money from the loan. Without a penalty, a borrower could pay the full amount of the loan which is against the desires of the lender.
* [http://www.irrq.com/us/repayment.php Online calculator for the early repayment charge]
Wikimedia Foundation. 2010.
Look at other dictionaries:
repayment — re‧pay‧ment [rɪˈpeɪmənt] noun FINANCE 1. [uncountable] when money that has been borrowed is paid back: • The government is to call for early repayment of $1.8 billion of Treasury bonds. • a schedule for debt repayment 2. [ … Financial and business terms
UK mortgage terminology — This page gives descriptions of UK mortgage terminology which can often confuse borrowers.IntroductionThe UK mortgage market is one of the most innovative and competitive in the world. Most borrowing is funded by either mutual organisations… … Wikipedia
Mortgage industry of the United Kingdom — The Mortgage industry of the United Kingdom has traditionally been dominated by building societies, but from the 1970s the share of the new mortgage loans market held by building societies has declined substantially. Between 1977 and 1987, the… … Wikipedia
Small Firms Loan Guarantee — The Small Firms Loan Guarantee (SFLG) can lend up to a maximum of £250,000 pounds to UK companies trading less than 5 years with a turnover of less than £5.6 Million.If your business is under 5 years old and your turnover (revenue) is not more… … Wikipedia
Securitization — is a structured finance process, which involves pooling and repackaging of cash flow producing financial assets into securities that are then sold to investors. The name securitization is derived from the fact that the form of financial… … Wikipedia
Uruguay — For other uses, see Uruguay (disambiguation). Oriental Republic of Uruguay República Oriental del Uruguay … Wikipedia
Economic Affairs — ▪ 2006 Introduction In 2005 rising U.S. deficits, tight monetary policies, and higher oil prices triggered by hurricane damage in the Gulf of Mexico were moderating influences on the world economy and on U.S. stock markets, but some other… … Universalium
United States — a republic in the N Western Hemisphere comprising 48 conterminous states, the District of Columbia, and Alaska in North America, and Hawaii in the N Pacific. 267,954,767; conterminous United States, 3,022,387 sq. mi. (7,827,982 sq. km); with… … Universalium
Net capital rule — The uniform net capital rule is a rule created by the U.S. Securities and Exchange Commission ( SEC ) in 1975 to regulate directly the ability of broker dealers to meet their financial obligations to customers and other creditors. Broker… … Wikipedia
international relations — a branch of political science dealing with the relations between nations. [1970 75] * * * Study of the relations of states with each other and with international organizations and certain subnational entities (e.g., bureaucracies and political… … Universalium