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Mortgage Library Definitions
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- Abbreviation for principal, interest, taxes and insurance, often lumped together in a monthly mortgage payment.
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- Abbreviation for private mortgage insurance: insurance issued by a company, which insures the lender against loss in the event that the borrower defaults on the mortgage.
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- A point is equal to one percent of the principal amount of your mortgage. For example, if you get a mortgage for $100,000, one point is means you pay $1000 to the lender. Lenders frequently charge points in both fixed-rate and adjustable-rate mortgages in order to increase the yield of the mortgage and to cover loan closing costs. These points are usually collected at closing and may be paid by the borrower or the home seller, or may be split between them. Points describe some of the cost of obtaining a loan. They are used to describe the origination fees charged by the originating lender or broker. They are also used to describe the discount fees charged by lenders to increase the overall yield. A point is equal to 1% of the loan amount.
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- Prepaid interest is the interest charged to borrowers at loan closing to pay for the cost of borrowing for a partial month. For example, if a loan closed on the 15th of the month, and the 1st payment is due 45 days later, the lender will charge 15 days of prepaid interest.
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- Full payment of the principal before the due date; occurs when a property is sold or the borrower refinances the existing loan.
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- Charge levied by the lender for paying off a mortgage loan before its maturity date.
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- Considered the permanent location of residency.
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- Insurance similar to FHA or VA insurance, insuring part of the first mortgage or deed of trust, enabling a lender to make a conventional loan of a higher percentage of the property value.
- Insurance which insures the upper portion of a mortgage loan thereby reducing the lenders risk to principal loss in the event of a borrowers default. The insurance coverage allows lenders to make higher loan-to-value ratios (95% LTV).
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- Charges for the lender's services associated with making the loan.
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- A tax levied by the local municipality or county on real and personal property.
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- A mortgage given by the buyer to the seller as part of the purchase consideration, as opposed to a hard money mortgage.
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