Definition of Residual interest:
An interest payment given to investors of real estate mortgage investments. The residual interest works like common shares in that its preferred shareholders receive their dividends and the remaining funds are divided among the common shareholders.
The term residual interest refers to the interest that may accrue on an interest-bearing account like a credit card, loan, line of credit, or mortgage. Residual interest is normally charged on balances incurred between billing cycles. In this case, it may also be referred to as trailing interest. The term may also apply to an interest payment received by investors in a structured credit investment product.
While borrowers are only required to make a minimum monthly payment on revolving credit accounts many borrowers choose to pay their outstanding balance in full. Paying the entire balance on a credit account as listed on a monthly statement can be a good financial habit. But just because consumers may pay their balances off entirely, they may still be subject to interest charges. This is where residual interest comes into play.
How to use Residual interest in a sentence?
- It is normally charged on balances that are incurred between billing cycles.
- Residual interest is any interest that accrues on an interest-bearing account like a credit card, loan, line of credit, or mortgage.
- Residual interest is also paid to investors when they invest in structured credit products like a real estate mortgage investment conduit .
- Although a consumer may pay off their balance, they may incur a small interest charge on their next statement due to the daily interest accrual.
Meaning of Residual interest & Residual interest Definition