Posted in Finance, Accounting and Economics Terms, Total Reads: 499
Half Life is a point or a date in time by which the half of the mortgage backed securities is paid off in principal. Also can be defined as the mid point of a mortgage repayment if the process is regular and all the installments are paid in time.
The time taken to reach the half-life is proportional to the interest rates.
Half-life is a time in the life of a mortgage backed security issued by the government when half the principal amount has been repaid. It is nothing but the time it takes for half of the aggregate principal to be paid back. Half-lives are calculated for mortgage backed securities guaranteed or issued by Fannie Mae, Ginnie Mae or Freddie Mac. Mortgage-backed securities generally have a short half-life. The reason for it is that many homeowners either pay off or they refinance their mortgages soon. It is also called as the average life.