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Interest-Only |
Also found in: Dictionary/thesaurus, Medical, Encyclopedia, Wikipedia, Hutchinson | 0.01 sec. |
Interest-Only 1. Describing a derivative in which the underlying asset is future interest payments on a pool of mortgages or other debt obligations. Interest-only derivatives are highly exposed to prepayment risk as homeowners who pay off their mortgages or loans early do not generate any more interest payments. 2. Describing a non-amortized loan. During the payment period of interest-only loans, one only pays on the interest that accumulates but not on the principal. At the end of the loan's term, the entire principal is due. An example is an interest-only mortgage, in which one makes interest payments for the term of the mortgage and then refinances in order to pay the principal at maturity. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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There are many benefits to interest-only mortgage loans. Some interest-only mortgage rates are set on adjustable rate payments. The cash flows from a mortgage backed security may be stripped and sold to investors separately as interest-only (I/0) securities or as principal-only (P/0) securities. |
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