What is a step loan?

step loan. a type of Adjustable-Rate Mortgage for which the interest rate is adjusted only once during the term of the loan. Therefore, the loan shares some of the features of both fixed-rate and adjustablerate loans. Example: A typical step loan features a fixed interest rate for the first 7 years of the term.

What are the four types of interest rates?

Here’s a breakdown of the various forms of interest, and how each might impact consumers seeking credit or a loan.

Fixed Interest.
Variable Interest.
Annual Percentage Rate (APR)
The Prime Rate.
The Discount Rate.
Simple Interest.
Compound Interest.

What is a 2 step mortgage?

A two-step mortgage is a mortgage that has both an introductory rate for a lender, and then a higher rate beyond the initial borrowing period.

What is a step rate?

Definition of step rate : a rate that changes by regular gradations: such as. a : a life-insurance premium rate that increases or decreases each year. b : a utilities rate whereby an increase in unit consumption results in a decrease in unit price.

What is a tiered rate?

A tiered-rate account is a bank account that pays different rates of interest, depending on the amount of the funds held in it. It can be any type of account but usually is either a money market or a savings account.

How risky is an adjustable-rate mortgage?

It is risky to focus only on your ability to make I-O or minimum payments, because you will eventually have to pay all of the interest and some of the principal each month. When that happens, the payment could increase a lot, leading to payment shock.

What are the 7 types of interest rates?

7 Kinds of Interest Rates

Simple Interest. Simple interest represents the most basic type of rate.
Compound Interest. Compound rates charge interest on the principal and on previously earned interest.
Amortized Rates.
Fixed Interest.
Variable Interest.
Prime Rate.

What are the 3 types of rates?

There are essentially three main types of interest rates: the nominal interest rate, the effective rate, and the real interest rate. The nominal interest of an investment or loan is simply the stated rate on which interest payments are calculated.

What is step rate financing?

With a step rate, your interest rate will increase each year (which will change your monthly payment) until your modified loan reaches its interest rate cap. After that, your rate will be fixed for the remaining life of the loan.

What is a Heloc account?

A home equity line of credit, also known as a HELOC, is a line of credit secured by your home that gives you a revolving credit line to use for large expenses or to consolidate higher-interest rate debt on other loans 1 such as credit cards.

What is a step rate premium?

Step Rate Premium — a life or health insurance policy that has built-in rate increases that are based on reaching certain ages or numbers of years in force.

How does a step rate work?

What is a step up in interest rate?

After the initial period, your rate will begin to adjust, or “step up” to a pre-determined interest rate, also referred to as an interest rate cap. Click the tabs below to learn more. IMPORTANT: If your loan was modified about five years ago your interest rate and monthly payment amount may be changing soon!

What is a step-rate mortgage?

Definition of Step-rate Mortgage A fixed-rate mortgage loan where payments are lower at the beginning of the loan, typically for two years, but then increase after the specified time period. Related Terms and Acronyms Principal, Interest and Taxes (PIT) — Acronym, Important,

What is a step rate modification on a mortgage?

Mortgage modifications help make your payments more manageable and affordable. Many times this is done by reducing the interest rate significantly. If you have a modification with a step rate feature, the initial modified interest rate is temporary (usually fixed for 5 years).