# Interest

Definition

- Money that is paid by a borrower to a lender for the use of borrowed funds. Interest is usually expressed as an annual percentage rate.
- The cost for obtaining, or cost received for providing, money or goods in a credit transaction, calculated as a fraction or percentage of the amount or value that was borrowed, or lent, respectively.

**Notes**

Bank account transaction code.

**Synonyms**

point, charging interest

**Acronyms**

int, IN

## Related Terms and Acronyms

- Accrued Interest — Definition,
- Interest which has already been earned but has not yet been paid.

- Add-on Interest — Definition,
- Interest that is computed at the beginning of the loan, then added to the principal, so that all must be repaid, even if the loan is paid off early.

- Amortization Table — Definition,
- A mathematical formula used to calculate monthly mortgage payments based on the borrowed loan amount, the interest rate, and the loan term.

- Amortized Loan — Definition,
- A loan that is completely paid off, interest and principal, by a series of regular payments that are equal or nearly equal.

- Annual Percentage Rate (APR) — Acronym,
**Very Important**,- 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. - Bank — Definition,
- An institution that acts as a financial intermediary by receiving money from depositors and lenders and also lending to borrowers.

- Bank Spread — Definition,
- The difference between the interest rate a bank charges a borrower and the interest rate a bank pays a depositor.

- Call Deposit Account — Definition,
- A bank account that combines some features from both savings and checking accounts.

- Cap — Definition,
- A limit imposed on an item.
- The top limit on the amount the interest rate can increase during a single time period of an adjustable-rate mortgage. Every ARM has two caps: a periodic cap, which limits the periodic changes to the interest allowed in the loan agreement, and a lifetime cap, which governs the total increase that can be imposed during the life of the loan.

- Compound Interest — Definition,
- Interest that is calculated by adding the interest earned in the current period to the principal and figuring the next period's interest on this "compounded" total amount.

- Finance Charge — Definition,
- Charges that include all of the interest expected to be earned over the life of a loan, in addition to the service charges, mortgage insurance premiums, and other loan-related charges.

- Financing Expenses — Definition,
- Expenses sustained from interest payments, financing, and dividends to shareholders.

- Fixed-Return Investments — Definition,
- Investments that provide a stable return.

- Guaranteed Investment Certificate (GIC) — Acronym,
**Important**,- An investment that pays a set rate of interest over a fixed period of time.

- Interest Adjustment Date — Definition,
- The date one month prior to the beginning of amortization when accrued interest computed on the monies advanced becomes due.

- Interest Factor — Definition,
- The decimal equivalent for an interest rate on a unit amount for a period of time. Computed by interest rate divided by number of days in a basic year times the number of days accrued.

- Interest Only Payments — Definition,
- A payment plan where only the interest is paid off.

- Interest Rate (IR) — Acronym,
**Very Important**,- The rate a lender charges an individual to borrow money.

- Interest-Crediting Methods — Definition,
- A number of methods used to establish how interest is accrued, owed and dispersed to the parties due.

- Lender — Definition,
- The bank or mortgage company offering the loan.

- Loan — Definition,
- Letting another party use something of value temporarily.

- Mortgage (mtg) — Abbreviation,
**Important**,- 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.

- Mortgage Calculator — Definition,
**Very Important**,- 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. - Mortgage Rate — Definition,
**Very Important**,- The interest rate on a mortgage loan.

➥ You can compare mortgage rates using this website by clicking 'Rates' above. - Operating Cash Flow (OCF) — Acronym,
- The money a company generates from its business operations. This revenue excludes costs from certain investments.

- Origination Date — Definition,
- The date on which a loan is funded.

- Origination Fee — Definition,
- The fee a lender charges to process a loan. It usually includes the cost to prepare loan documents, check a borrower's credit history, inspect the property and sometimes conduct an appraisal. CanEquity will in most cases use a lender who doesn't charge this fee or we will cover the cost in full.

- Parking (prk) — Abbreviation,
- A term that refers to depositing cash in a high-yield money market account until it is transferred to another account to pay bills.

- Per Diem Interest — Definition,
- Interest that is charged daily; usually refers to the partial month's interest that the buyer pays on the mortgage covering the period from the day of closing to the end of the month.

- Periodic Rate — Definition,
- The interest rate in relation to a specific amount of time. For example, the monthly periodic rate is the cost of credit per month whereas the daily periodic rate is the cost of credit per day.

- Point — Definition,
- A point equals 1 percent of a mortgage loan. Some lenders charge "origination points" to cover expenses of making a loan. Some borrowers pay "discount points" to reduce the loan's interest rate.

- Pre-computed Loan — Definition,
- With a pre-computed loan, the interest owed over the life of the loan is calculated using a standard amortization table. After signing for this type of vehicle loan, the borrower is obligated to pay back principal plus the full amount of interest that will accrue over the entire term of the loan.

- Pre-paid Interest — Definition,
- Interest that a borrower pays before it is due, usually to save taxes.

- Prime Lending Rate (PLR) — Acronym,
**Very Important**,- The rate of interest charged on loans by chartered banks to their most creditworthy customers.

➥ Bank of Canada's prime (best) lending rate. - Prime Rate — Definition,
- The rate suggested by the Bank of Canada on which most banks base their prime mortgage lending rate.

- Principal — Definition,
- The original balance of money lent on an outstanding loan and fees, excluding interest. Also the remaining balance of a loan, excluding interest.

- Principal and Interest (PI, P&I) — Acronym,
- Acronym for the elements of a mortgage payment: principal and interest.

- Principal, Interest and Taxes (PIT) — Acronym,
**Important**,- Principal, interest and taxes. The components of a monthly mortgage payment.

- Principal, Interest, Taxes, and Insurance (PITI) — Acronym,
- Acronym for the elements of a mortgage payment: principal, interest, taxes and insurance.

- Rate — Definition,
- Percentage a borrower pays for the use of money, usually expressed as an annual percentage.

- Simple Interest (SI) — Acronym,
**Important**,- Interest computed only on the principal balance, without compounding.

- Simple Interest Loan — Definition,
- A method of allocating the monthly payment between interest and principal. The interest charged is determined by the unpaid principal balance on the loan, the interest rate, and the number of days since the last payment. The rest of the payment goes to the principal. Making early payments or additional payments reduces the loan's principal and cuts the total interest paid over the life of the loan.

- Step-rate Mortgage — Definition,
**Important**,- A fixed-rate home loan on which payments are lower at the beginning, typically for two years, and which then rise.

- Total Annual Loan Cost (TALC) — Acronym,
- A method of finding the annual cost of a reverse loan.