Glossary Of Mortgage Terms
Adjustable Rate Mortgage
A mortgage loan where the interest rate adjusts periodically based on the changes of a specified index such as the one-year Treasury Bill or the LIBOR.
Amortization
The calculation of the amount of the installment payment it takes to pay off the obligation at the end of a fixed period of time.
Annual Percentage Rate (APR)
The total cost of a mortgage stated as a yearly rate. It is typically higher than the note rate because it includes the base interest rate plus specific closing costs.
Appraisal
A professional report that estimates the market value of a property.
Assessed Value
The value a tax authority places on real property for the purpose of assessing yearly property taxes.
Balloon Mortgage
A mortgage that is amortized over a stated period but provides for a lump-sum payment due at an earlier period, e.g. 30-year due in 15, where the payments are based on 30-year repayment but the loan is due paid in full in 15 years.
Cap
Limits how much the interest rate on an adjustable rate mortgage (ARM) can increase or decrease.
Cash to Close
Liquid assets available to be used to pay the closing costs involved with a mortgage transaction.
Collateral
Property pledged as security for a loan, such as property pledged as security for a mortgage.
Conventional Mortgage
A mortgage not obtained under a government-insured program.
Deed
A legal document that is recorded in the county conveying title to a property.
Deed of Trust
The legal document that pledges the property for the security of a mortgage loan.
Default
Failure to make mortgage payments in a timely manner or to comply with other requirements outlined in the note.
Earnest Money Agreement (Sales Contract)
The written agreement between the buyer and seller of a property, which stipulates the amount of the purchase, closing date and any repairs or other conditions that must be met before the transaction (purchase) is completed.
Easement
A right of way given to persons other than the owner for access to or over their property.
Equity
The portion of a property’s value over and above the amount owed against it.
Escrow
A disinterested third party that handles legal documents and funds on behalf of the seller and buyer.
First Mortgage
A real estate loan that has priority over any other subsequently recorded mortgages.
Fixed Interest Rate
An interest rate which does not change during the term of the loan.
Foreclosure
A legal procedure in which the mortgage loan is in default and the property taken from the borrower and sold by the lender to pay off the loan against the property.
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