Mortgage Terms and Definitions
- Adjustable Rate
Mortgage (ARM) - A mortgage with and interest rate that fluctuates
according to the movements of a predetermined index. There are several
types of ARM's, some change quicker than others, but all have a ceiling
- APR (Annual Percentage
Rate) - A term used in the Truth-in-Lending Act to represent the
percentage relationship of the total finance charge to the amount of
the loan. The APR reflects the cost of your mortgage loan as a yearly
rate. It will be higher than the interest rate stated on the note because
it includes, in addition to the interest rate, loan discount points,
fees and mortgage insurance.
- Consolidation Mortgage
- Available up to 85% of current appraised value of your home. Good
credit and provable income are required on any mortgage in this category
exceeding 70% of the current appraised value on your home.
- Conventional Mortgage
- Any mortgage that is not insured or guaranteed by the federal government.
- Equity - A
homeowner's financial interest in a property. Equity is the difference
between the fair market value of a property and the amount still owed
on the mortgage.
- Fixed Rate Loan
- A mortgage in which the interest rate does not change during the entire
term of the loan.
- High-Ratio Mortgage
- Mortgage loans in excess of 80 percent of the loan amount divided
by the lower of the sales price or appraised value.
- Interest Rate
- The fee charged for borrowing money.
- Line of Credit
Mortgage - A line of credit secured by a mortgage on your property.
- Market Rate
- The average rate charged by lenders for conventional, fixed-rate loans.
- Mortgage Life Insurance
- Standard or reducing term insurance that will payout your mortgage
in the event of death. Available for single or joint borrowers. Super
- Mortgagor -
The borrower giving the lender a lien on property as security for the
repayment of a loan.
- Mortgagee -
The lender that holds the lien on property as security for the repayment
of a loan.
- Private Mortgage
- Insurance paid for by the borrower to insure the lender against default
in conventional loans.
- Principal -
The amount borrowed or remaining unpaid; also, that part of the monthly
payment that reduces the outstanding balance of a mortgage.
- Qualifying Ratios
- Guidelines applied by the lenders to determine how large a loan to
grant a home buyer.
- The process of paying off one loan with the proceeds from a new loan
using the same property as security.
- Reverse Mortgage
- A special program for the elderly that provides income until death.
Payment requirements are arranged through the increase in the principal
amount of the loan.