Intermediate terms

Fed Policy & Rates: Key Terms for Investors

This curated collection offers key terms that might be helpful when exploring Federal Reserve policy and its impact on real estate investment. Understand commonly referenced concepts like interest rates, inflation, and monetary tools to better navigate borrowing and market conditions. It serves as a quick reference to clarify essential terminology.

Learning Path

Property Value

Property value is the estimated monetary worth of a real estate asset, determined by various factors including market conditions, location, and physical characteristics. It is a critical metric for investment analysis, financing, and taxation.

Intermediate13-14 min

Quantitative Tightening

Quantitative Tightening (QT) is a monetary policy where a central bank reduces its balance sheet by allowing maturing assets to expire without reinvestment, thereby decreasing the money supply and tightening financial conditions to combat inflation.

Advanced12-15 min

Yield Curve

The yield curve is a graphical representation of the yields of bonds with equal credit quality but differing maturity dates, providing critical insights into market expectations for future interest rates and economic growth, which are vital for real estate investment decisions.

Advanced10-15 min

Adjustable-Rate Mortgage

An Adjustable-Rate Mortgage (ARM) is a home loan where the interest rate can change periodically based on an index, leading to fluctuating monthly payments after an initial fixed-rate period.

Beginner14-15 min

Debt Service Coverage Ratio

The Debt Service Coverage Ratio (DSCR) is a financial metric used in commercial real estate lending to assess a property's ability to generate sufficient Net Operating Income (NOI) to cover its annual mortgage debt payments.

Advanced15-18 min

Refinancing

Refinancing is the process of replacing an existing mortgage or loan with a new one, often to secure better terms, lower interest rates, or access built-up property equity.

Intermediate15-18 min

Debt-to-Income Ratio

The Debt-to-Income (DTI) Ratio is a financial metric used by lenders to assess a borrower's ability to manage monthly payments and repay debts, calculated by dividing total monthly debt payments by gross monthly income.

Intermediate18-20 min

Interest Rate

An interest rate is the percentage charged by a lender for the use of borrowed money, typically expressed as an annual percentage of the principal amount.

Beginner15-18 min

Monetary Policy

Monetary policy refers to actions taken by a central bank, like the Federal Reserve, to manage the money supply and credit conditions, influencing interest rates, inflation, and ultimately, the real estate market.

Intermediate13-14 min

Borrowing Power

Borrowing power refers to an individual's or entity's capacity to secure financing from lenders, representing the maximum loan amount they can obtain based on financial health and creditworthiness.

Intermediate3 min

Quantitative Easing

Quantitative Easing (QE) is a monetary policy where a central bank buys government bonds and other financial assets to inject money into the economy, lower long-term interest rates, and stimulate economic activity during downturns.

Intermediate11-12 min

Fixed-Rate Mortgage

A fixed-rate mortgage is a home loan with an interest rate that remains unchanged for the entire loan term, providing stable and predictable monthly payments.

Beginner13-14 min

Loan-to-Value Ratio

The Loan-to-Value (LTV) ratio is a financial metric used by lenders to assess the risk of a mortgage loan, calculated by dividing the loan amount by the property's appraised value, expressed as a percentage.

Intermediate14-15 min

Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, leading to a decrease in the purchasing power of currency over time.

Intermediate14-15 min

Mortgage Rates

Mortgage rates are the interest percentages charged on real estate loans, determining the cost of borrowing and significantly impacting monthly payments and investment profitability.

Intermediate15-18 min

Federal Funds Rate

The Federal Funds Rate is the target interest rate for overnight lending between commercial banks, influenced by the Federal Reserve to manage inflation and employment, and serving as a benchmark for other interest rates, including mortgages.

Intermediate12-15 min

Debt Service

Debt service is the total amount of principal and interest payments required to repay a loan over a specific period, typically for a mortgage or other property-related financing.

Beginner11-12 min

Treasury Yields

Treasury yields represent the return an investor receives on U.S. government debt securities, serving as a critical benchmark for interest rates across the economy, including mortgages and other real estate financing.

Intermediate5-6 min

Consumer Price Index

The Consumer Price Index (CPI) is an economic indicator measuring the average change over time in the prices paid by urban consumers for a market basket of goods and services, serving as a key gauge of inflation and purchasing power.

Intermediate15-18 min