Duration
Frequently Asked Questions about Mortgage Loan Duration
What does "Duration" refer to in real estate finance?
Duration refers to “Mortgage Loan Duration,” a measure of the weighted average time it takes to receive all principal and interest payments on a mortgage loan. It helps investors understand a loan’s sensitivity to changes in interest rates.
How is mortgage loan duration used in CRE analysis?
It is used to assess interest rate risk. A longer duration implies greater sensitivity to rate changes, affecting the loan’s market value and refinancing strategies.
How does mortgage loan duration differ from loan term?
Loan term is the total time over which a loan is scheduled to be repaid (e.g., 10 or 30 years), while duration reflects the average time weighted by cash flows and is typically shorter than the loan term.
Why is understanding loan duration important for CRE investors?
It helps investors manage interest rate risk, evaluate refinancing timelines, and anticipate how much value might be gained or lost if interest rates shift.
Does the glossary provide a separate entry for Mortgage Loan Duration?
[Answer unclear or missing in transcript]
Click here to get this CRE Glossary in an eBook (PDF) format.