Understanding Mortgage Terminology
P-Z
|
| Payment
Adjustment Period |
| This
is the time frame between payment adjustments made on Adjustable Rate
Mortgages and a usual time frame is one, three, or five years. |
back
|
| Payment
Cap |
| A
cap placed on the borrower's payment rather than his interest rate. The
level to which the monthly payment may rise is limited to a certain dollar
figure. A typical payment cap used today would be 7.5% of the payment
(Roughly equivalent to one percent in interest). |
back
|
| Payment
Rate |
| The
effective rate of interest the buyer is paying at a certain time, regardless
of the overall interest rate of the note. |
back
|
| Permanent
Buydown |
| An
amount of money a lender is paid to permanently reduce a borrower's interest
rate and payments. |
back
|
| Permanent
Loan |
| A
long-term mortgage of ten years or more, often registered after construction
is complete. Often referred to as an "end loan". |
back
|
| P.I.T.I. |
| This
stands for principal, interest, taxes and insurance. It is representative
of the borrower's actual monthly mortgage-related expenses. Most residential
mortgage payments are referred to as P.I.T.I . |
back
|
| Pledged
Account Buydown |
| This
refers to a principle amount paid plus interest earned on the principal
to reduce a borrower's interest rate and payment. |
back
|
| Points |
| A
one - time fee you pay the bank for originating a loan. A charge equal
to 1% of the loan amount which increases or equalizes the lender's yield
or rate of return. Lenders offer various rate/point combinations. |
back
|
| Prepayment
Penalty |
| A
penalty that a lender may impose on a borrower who pays off a loan before
it is due. |
back
|
| Prepayment
Privilege |
| The
right of a borrower to pay off all or part of the outstanding principal
before the maturity date, without incurring a penalty. |
back
|
| Principal |
| It
is the amount of the mortgage debt that is presently owed and remains
unpaid. The principal is the part of the monthly payment that reduces
the remaining balance of a mortgage. |
back
|
| Private
Mortgage Insurance |
| Private
mortgage insurance is to protect lenders against foreclosure losses provides
mortgage insurance. Similar to the FHA's mortgage insurance premium, it
is provided to lenders making conventional loans with less than 20% down.
It protects lenders against foreclosure losses. |
back
|
| Prorate |
| The
seller and buyer allocate their proportionate share of an obligation paid
or due. For example, real property taxes, fire insurance or condominium
fees may be prorated. |
back
|
| Quit
Claim Deed |
| A
document that releases the deeding or giving up of one's interest in a
property to another party. |
back
|
| Rapid
Payoff Mortgage (RPM) |
| Another
name for a short term mortgage. |
back
|
| Realtor
|
| A
professional real estate broke or associate who is an active member in
a local real estate board that is affiliated with the National Association
of Realtors. Not every broker is a Realtor |
back
|
| Real
Estate Mortgage Investment Conduits (REMICs) |
| Mortgage
securities may be pooled to create collateral for a more complex type
of mortgage security known as a Real Estate Mortgage Investment Conduit.
They are a complex type of mortgage securities that may be pooled to allow
cash flows to be split so that different classes of securities may be
created. |
back
|
| Real
Estate Professional |
| Any
real estate broker, sales person, or attorney who holds a real estate
license. |
back
|
| Refinance |
| To
obtain or replace an existing mortgage with a new mortgage loan on property
already owned. New mortgage may have different terms than the old one.
|
back
|
| Release
of Liability |
| A
release from financial obligations from a mortgage due to another individual
becoming responsible for the obligation. Both the VA and FHA allow releases
of liability on their mortgages. |
back
|
| Renegotiable
Rate Mortgage (RRM) |
| Similar
to an Adjustable Rate Mortgage, this type of mortgage allows the interest
rates and payments to be adjusted periodically according to an index.
|
back
|
| REO
(Real Estate Owned) |
| Defined
as a term for properties taken back by lenders in foreclosures. |
back
|
| Residual
Income |
| Residual
income is determined by subtracting all known obligations from the borrower's
gross monthly income to see how much is left to support the family. This
amount replaces the Income Ratio on VA loans. |
back
|
| Restriction |
| A
provision in a deed which limits in some way the right to use land or
convey it's title. Examples are building setback lines and limitations
to residential uses. |
back
|
| Reverse
Annuity Mortgage (RAM) |
| A
type of mortgage where the property's equity serves as security for periodic
payments made by the lender to the borrower. Mortgage is generally paid
out upon the sale of the property. |
back
|
| Rollover
Mortgage (ROM) |
| A
mortgage where the payments are only guarante
ed for three, four, or five
years. The borrower is allowed to refinance at the end of the term at
the interest rate then applicable. |
back
|
| Savings
and Loans |
| The
traditional lenders for conventional home loans. |
back
|
| Second
Mortgage |
| A
mortgage loan that is registered on title after a first mortgage is already
recorded. It is behind the first mortgage in priority. In the event of
default and sale of the property, the second mortgagee will only be paid
if there are funds left after the payment of the first mortgagee. |
back
|
| Secondary
Mortgage Market |
| A
market where the primary lenders can sell packaged home loans to obtain
more funds to make additional loans. |
back
|
| Shared
Appreciation Mortgage (SAM) |
| It
is a loan arrangement where two or more parties participate in the purchase
of real estate and share the appreciation and tax deduction. Similar to
shared equity mortgages. |
back
|
| Shopping
Center |
| A
group of stores catering to a trade area, which offer a variety of goods
and/or service and on-site parking. |
back
|
| Strip
Commercial |
| It
refers to a string of stores in a commercial area with no central leasing,
management or theme. |
back
|
| Sweat
Equity |
| When
a purchaser contributes to the construction or rehabilitation of a property
in the form of labor or services rather than cash. |
back
|
| Swing
Loan |
| See
Bridge Loan |
back
|
| Telecommuting
|
| Working
at a remote location instead of traveling to the primary workplace. |
back
|
| Title |
| A
legal document evidencing proof of ownership. |
back
|
| Title
Company |
| A
corporation which is in the business of selling policies of insurance
guaranteeing the ownership, quality of title to land and also to perform
escrow functions. |
back
|
| Title
Insurance |
| Protection
for the lender (lender's policy) against the consequences of a pre-existing
lien or the buyer (owner’s policy) against encumbrance on a property
that is discovered after change of ownership. |
back
|
| Usury |
| Extremely
high interest charged, in excess of the legal rate established by law. |
back
|
| Vesting |
| Conveying
ownership or control of through legal action. |
back
|
| Veterans'
Administration Loans |
| Mortgage
loans to veterans by banks, savings and loans, or other lenders that are
guaranteed by the Veterans' Administration, enabling veterans to buy a
residence with little or no money down. |
back
|
| Walk-Up
Apartments |
| Three
to five story buildings, without an elevator. They may be mixed single
and multi-family; usually only two or three different types of units. |
back
|
| Warehouse/Distribution
|
| Typically
warehouse and distribution facilities are often located in the lowest-priced
land in older parts of town or as well as suburban fringes. Frequently,
like light industrial/assembly property, office use is limited to management
tasks for distribution or warehouse facility, or about 15 percent of total
space. |
back
|
| Warehouse
Fee |
| Charged
as an offset to cover a loss, many mortgage firms borrow funds on a short-term
basis in order to originate loans that will later be sold in the secondary
mortgage market. When the rate of interest is higher on short-term loans
than on long term mortgage loans, the lender has an economic loss. |
back
|
| Wraparound
Mortgage |
| A
secondary financing option in which a new larger mortgage is created to
encompass the first mortgage. This large second mortgage is used to preserve
the low interest rate on the first mortgage for a potential buyer. |
back
|
| Yield |
| A
profit obtained on an investment, which includes the interest rate charged,
discount points paid and any other charges collected. |
back
|
