What Does Arrears Mean ?
When a person has to make regular payments for transactions that stipulate it and fails to do so, then it means that the account of that person is in arrears. Usually, this is seen where mortgages, rent payments, telephone bills and utility bills are concerned. However, even in investment there are arrears. More...
How Is Interest Computed On Arrears ?
Usually when it comes to arrears, people automatically assume that it relates to debt that is not paid on time. However, the use of the term arrears differs from one industry to the next. For instance, where stocks, trading and bonds are concerned, arrears refers to back dividends that are owned to shareholder; while for bond holders, arrears means interest that was not paid on time. Even in real estate investment there are arrears.
When a person takes a mortgage, he or she is expected to pay a monthly amount until the mortgage loan amortizes. However, if the person does not pay these monthly installments, he or she is in default of the mortgage. At the same time, the lender will look at the arrears and compute interest on it. Also, when people opt for refinancing, arrears are taken into consideration. In this case, interest in arrears is looked at by the new lender. This is nothing but the interest that was payable the previous month. More...
Mortgage Arrears And Quick Payout Loans
If the mortgage stays in arrears for a long time, it is difficult for a borrower to catch up with the payments. The reason for this is very simple. The longer a borrower does not pay the monthly installments, the lender keeps adding penalties and fees on the amount that is owed. Usually, when one monthly installment is missed, the mortgage is said to be in arrears. If the arrears are over 60 days, then the borrower is in default of the mortgage.
Every month there is a stipulated due date by when the mortgage amount must be paid. There can be also a grace period, which for around 1 to 2 weeks, after the due date by which the borrower must make the payment. During the grace period no penalties are levied. However, once the due date and grace period expire, the lender will impose a penalty on the mortgage. This amount varies from 2 percent to 5 percent of the total loan amount and varies from lender to lender. More...