Default Interest
Quick Summary
A higher interest rate that applies after payment default.
ELI5 Explanation
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If you miss payments, the rate can jump as a penalty.
Detailed Explanation
Private mortgage commitments often specify a default interest rate above the regular contract rate. It can increase carrying costs quickly while legal enforcement is underway.
Example
A loan at 11.99% may move to 17.99% after uncured default under contract terms.
Why It Matters
It can rapidly increase arrears and reduce recovery options.