Adjustable Rate — This is a rate of interest that may change from time to time. It is determined by a set of parameters called an index. This results in different payments at different periods of time.
Amortization — A process by which a debt is cleared through payments made monthly over a particular period of time.
Application Fee — The fee paid towards processing of a loan.
Appraisal — A valuation of a property or an asset that is based on the market conditions prevailing at a particular time.
Balloon Payment — A piece of payment that aims at repaying a part of the debt that is still unpaid.
Cap — This is the highest increase that can be allowed for a flexible rate mortgage loan, it refers to a ceiling placed on both rate of interest and the payment for a particular period of time.
Cash Out — When you receive money after you refinance a mortgage you are holding presently, it is referred to as cashing out.
Ceiling — The maximum rate of interest that is permissible over the entire time that a flexible rate mortgage loan is in operation.
Closing Costs — The costs that are usually associated with the closure of a loan e.g., title insurance.
Conforming Loan — Usually refers to a loan (mortgage) that is less than $203,150 in value.
Credit Limit — The highest amount you can borrow when you're going for a home equity plan.
Discount Points (or Points) — An amount that is paid in order to reduce an interest rate that is being charged.
Down Payment — A lump sum payment paid at the time of making a purchase.
Due on Sale — A clause that stipulates that in case the buyer sells off a property, a full repayment must be made to the lender.
Equity — A distinction between the market value of a property and the balance amount (the unpaid part) of a mortgage loan.
First Mortgage — This refers to a mortgage that is considered most important in legal terms-it comes before all others in terms of legal interest.
Fixed Rate — A specified rate of interest that remains unchanged till the loan is closed.
FHA Loan — This can also be called a "FHA Insured Loan." In this loan the Federal Housing Administration provides a separate insurance to the lender. It provides protection against losses the lender may incur if you default on your payments.
Good Faith Estimate — This is a written document a lender provides the borrower. It gives an estimate of closing costs that are likely to occur once you make an application for the closure of a loan.
Grace Period — An amount of time after the due date during which no late payments are charged. However, these late payments may be reported in a credit report.
Gross or Total Income — The total amount of money the borrower earns or receives in a year, calculated before the deduction of taxes and other expenses.
Hazard Insurance — This is an agreement between the buyer and the insurer. It provides compensation to the person insured in case he loses his property due to a variety of hazards. In return, the insured pays a premium.
Jumbo Loan — A loan that is over $203150 in value.
Loans with Home Equity — This is a loan that may charge either fixed or flexible rates of interest. The loan is advanced for a variety of reasons. The main security provided for such loans is your home.
Loan to Value Ratio — The ratio between the sale price (or even the appraised value) and the loan amount. It is usually expressed as a percentage.
Lock in or Simply Lock — It refers to a commitment made by the lender assuring a particular rate of interest or feature over a specified period of time.
Margin — A certain amount that is added to the index to find out the interest rates for flexible rate mortgages. It is usually expressed as a percentage.
Minimum Payment — The least amount you have to pay when you're going for a home equity loan or other loans.
Mortgage Assumption — An agreement that is made by the person / institution establishing that he/she is principally responsible for the repayment of a loan.
Mortgage Insurance — An insurance bought by the borrower in order to insure a lender (or a government) against a loss due to payment defaults.
Mortgage Loan — This refers to a loan that banks upon real estate as a security should you happen to default on any of the conditions stipulated in your loan.
Mortgagee — The person or institution lending the amount in a mortgage loan.
Mortgagor — The person / institutions borrowing the amount on a mortgage loan.
Annual Percentage Rate (APR) — This is a rate (expressed as a percentage) that states the cost for advancement of credit on a yearly basis.
Points — An amount that is paid in order to maintain or reduce an interest rate that is being charged.
Penalty for Prepayment — A penalty that is paid to a lender when a loan is paid off before the date specified.
Contract of Sale — An agreement that the buyer and seller enter into. It provides in written form details regarding the purchase price and other stipulations decided upon a transfer of ownership rights.
Security Interest — The interest taken by the lender in the property of the borrower in order to assure that the debt will be repaid.
Servicing The Loan — It refers to the continuous process of maintaining a mortgage loan.
Title — Written proof regarding the ownership of a specific property.
Transaction Fee — This is a charge you will have to bear every time you draw on the credit line of your home equity.
Trust Deed — This is similar to a mortgage. In real estate terms, it refers to an agreement that uses your home as collateral for a loan.
Underwriting — The process by which the provided data is verified and the loan is sanctioned upon successful verification.
Variable Rate — A rate of interest that change or varies with time.