Rate-Improvement Mortgage
 |
Definition of 'Rate-Improvement Mortgage'A type of fixed-rate mortgage, which contains a clause that entitles the borrower to reduce the fixed-interest-rate charge on the mortgage once, and early in the mortgage. The option will be exercised when interest rates fall lower then the borrowers initial mortgage rate.There is typically a fee associated with exercising this option, and the initial mortgage might have a higher-than market-interest rate and/or high costs. However, the rate reduction option could save the borrower the costs of refinancing which might be more then the cost of using their rate improvement option. |
 |
Investopedia explains 'Rate-Improvement Mortgage'There is no "free lunch" in the world of finance. A borrower who is told that they are being "given" the option to reduce their interest rate for a minimal fee should be aware that the lender has the true cost of that option priced in the transaction somewhere.That's not to say the option is not fairly priced and could be valuable to the borrower should interest rates fall. The borrower should simply have a good understanding of the costs, risks and benefits of paying for the option in the initial transaction. |
Related Definitions
Articles Of Interest
-
How Interest Rates Affect The Housing Market
Understand how rate changes can affect home prices, and learn how you can keep up. -
Make A Risk-Based Mortgage Decision
Find out how to choose which mortgage style is right for you. -
How Mortgage Refinancing Affects Your Net Worth
Find out how to determine whether refinancing will put you ahead or even more behind. -
How To Keep Costs Low When Refinancing Your Home
With interest rates still being relatively low, now is a great time to capitalize on refinancing your home. Be aware of what fees are involved in a refinance, and how to keep these costs low. -
How To Properly Research For The Best Mortgage Rate
You’ve probably been told to shop around for the best rate, but what exactly does that entail? Find out how to ensure you're getting the best possible rate on your mortgage. -
What Is A Mortgage?
A mortgage is a loan used to purchase a home, where the property serves as the borrower's collateral. -
A Lousy Investment That May Be A Good Source Of Income
In the past few years reverse mortgages have been heavily marketed as the way to become debt, and worry, free. For some seniors a reverse mortgage makes sense, for other though this dream product ... -
6 Tips For Selling Your Home Fast
Find out what you can do to stand out from the competition and make your home an easy sell. -
5 Smart Ways To Use Your Tax Return
This year, find out how to stretch your tax refund further to strengthen your future. -
Common Liabilities That Hurt Your Net Worth
Every penny that you keep out of the liability side of the net worth equation essentially ends up on the asset side.
Free Annual Reports