Current Mortgage Rates: Richmond, VA
2.750% (2.807% APR) 30yrs
2.125% (2.130% APR) 15yrs
as of 09/23/21

Building on Trust™

## Glossary of Mortgage Terms

Search for glossary terms (regular expression allowed)
Term Main definition
Impounds
Same as Escrow.
Indexed ARM
An ARM on which the interest rate adjusts mechanically based on changes in an interest rate index, as opposed to a "discretionary ARM" on which the lender can change the rate at any time subject only to advance notice. All ARMs in the US are indexed.
Initial interest rate
The interest rate that is fixed for some specified number of months at the beginning of the life of a an ARM. The initial rate is sometimes referred to as a "teaser" when it is below the fully indexed interest rate.
Initial rate period
The number of months for which the initial rate holds, ranging from 1 month to 10 years.
Interest accrual period
The period over which the interest due the lender is calculated. If the interest accrual period on a 6 % mortgage for \$100,000 is a year, as it is on some loans in the UK and India, the interest for the year is .06(\$ 100,000) = \$6,000. If interest accrues monthly, as it does on most mortgages in the US, the monthly interest is .06/12(\$l 00,000) = \$500. If interest accrues biweekly, as on a few programs in the US, the biweekly interest is .06/26 (\$100,000) = S230.77. And if interest accrues daily, as HELOCs and some other mortgages in the US do, the daily interest is .06/365(5100,000) = \$16 .44.
Interest cost
A time-adjusted measure of cost to a mortgage borrower. It is calculated in the same way as the APR except that the APR assumes that the loan runs to term, and is always measured before taxes. The formula is shown in Mortgage Formulas. Interest cost is measured over the individual borrower's time horizon, and it may be measured after taxes at the individual borrower's tax rate. In addition, the cost items included in interest cost may be more or less inclusive than those included in the APR.
Interest due
The amount of interest, expressed in dollars, computed by multiplying the loan balance at the end of the preceding period times the annual interest rate divided by the interest accrual period. It is the same as interest payment except when the scheduled mortgage payment is less than the interest due, in which case the difference is added to the balance and constitutes negative amortization.
Interest payment
The dollar amount of interest paid each month. It is the same as interest due so long as the scheduled mortgage payment is equal to or greater than than the interest due. Otherwise, the interest payment is equal to the scheduled payment.
Interest rate
The rate charged the borrower each period for the loan of money, by custom quoted on an annual basis. A rate of 6%, for example, means a rate of 1/2% per month. A mortgage interest rate is a rate on a loan secured by a specific property.
The frequency of rate adjustments on an ARM after the initial rate period is over. The rate adjustment period is sometimes but not always the same as the initial rate period. As an example, a 3/3 ARM is one in which both periods are 3 years while a 3/1 ARM has an initial rate period of 3 years after which the rate adjusts every year.
Interest rate ceiling
The highest interest rate possible under an ARM contract; same as "lifetime cap." It is often expressed as a specified number of percentage points above the initial interest rate.
Interest rate decrease cap
The maximum allowable decrease in the interest rate on an ARM each time the rate is adjusted. It is usually 1 or 2 percentage points.
Interest rate floor
The lowest interest rate possible under an ARM contract. Floors are less common then ceilings.
Interest rate increase cap
The maximum allowable increase in the interest rate on an ARM each time the rate is adjusted. It is usually 1 or 2 percentage points, but may be 5 points if the initial rate period is 5 years or longer.
Interest rate index
The specific interest rate series to which the interest rate on an ARM is tied, such as "Treasury Constant Maturities, 1-Year," or "Eleventh District Cost of Funds." All the indices are published regularly in readily available sources.

## Mortgage Rate Meter

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