• The difference between the interest rate charged to borrowers and the interest rate paid to depositors.

rate spread, interest rate spread

Related Terms and Acronyms

  • 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.
  • Borrow Definition,
    • To get a loan of money.
    • Sand, gravel or other material used for grading; a slope.
  • Borrower Definition,
    • A person who borrows money or obtains a loan.
  • Debtor Definition,
    • Anyone who owes money to a creditor.
    • A person who has filed a petition for relief under the bankruptcy laws.
  • Interest Rate (IR) Acronym, Very Important,
    • The rate a lender charges an individual to borrow money.
  • Lender Definition,
    • The bank or mortgage company offering the loan.
  • Loan Definition,
    • Letting another party use something of value temporarily.
  • Margin Definition,
    • Expressed as percentage points, the amount that a lender adds to an index to arrive at the final interest rate. For example, if the index is 9 percent and the margin 2.75 percent, the final interest rate is 11.75 percent.
    • The difference between the cost and the selling price.
  • 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.
  • Rate Index Definition,
    • A table of yields or interest rates being paid on debt (such as Treasury notes or bank deposits) that is used to determine interest-rate changes for adjustable-rate mortgages and other variable-rate loans.
Compare. Calculate. Apply today.
Compare Mortgage RatesMortgage CalculatorsApply for a Mortgage