Interest can be defined as the price paid by the borrower for the use of funds saved by the lender and the compensation to the lender for deferring expenditures. This compensation comprises two elements, namely a payment equal to the loss of purchasing power of the principal during the term of the loan and a balance that represents the real interest accruing to the lender. However this simplicity does not extend into the area of rate determination since rates vary not only because of inflation, as implied above, but also because of a number of other influences, including: the amount, purpose and period of the transaction; the credit-worthiness of the borrower; the collateral offered and/or other guarantees/guarantors available; the competition for the transaction; government policy. Interest rates are shown as short-term, generally 3 months, and long-term, generally 10 years, with forecast data available for both. For short and long term interest rates, annual and quarterly data are normally averages of monthly figures.
Call money is a short term loan made by a bank to a borrower, where unlike the more usual kinds of loan, which are for a set term, and with a payment schedule, call money is repayable on demand. Call money is used by large financial institutions in the short-term money market to obtain funds quickly at inter-bank interest rates.
A warehouse line of credit is a credit line used by mortgage bankers. It is a short-term revolving credit facility extended by a financial institution to a mortgage loan originator for the funding of mortgage loans.
The cycle starts with the mortgage banker taking a loan application from the property buyer. Then the loan originator secures an...