A
- Amortization: The period over which a mortgage is paid off in full, usually expressed in years.
- Adjustable-Rate Mortgage (ARM): A mortgage with an interest rate that may vary based on market conditions.
- Appraisal: An expert's estimate of the value of a property, often required by lenders.
- Assumption Agreement: An arrangement where a buyer takes over the seller’s existing mortgage.
B
- Blended Payments: Regular mortgage payments that include both the interest and the principal amount.
- Bridge Financing: Short-term financing used to bridge the gap between the purchase of a new property and the sale of an existing one.
- Broker: A professional who arranges transactions between a buyer and a lender, often securing a mortgage for the buyer.
C
- Closed Mortgage: A mortgage that cannot be paid off, renegotiated, or refinanced before the end of its term without a penalty.
- Collateral: An asset that is pledged as security for the repayment of a loan.
- Conventional Mortgage: A mortgage loan that is equal to 80% or less of the property’s appraised value or purchase price.
D
- Debt-Service Ratio: A measurement of a borrower's ability to manage their monthly payments for debts.
- Default: Failure to meet the legal obligations of a mortgage, like missing payments.
- Down Payment: The portion of a property's purchase price that the buyer pays in cash and does not finance with a mortgage.
E
- Equity: The difference between the value of a property and the remaining mortgage balance.
- Escrow Account: An account where funds are held in trust by a third party, often used for property taxes and insurance.
F
- Fixed-Rate Mortgage: A mortgage with a constant interest rate throughout its term.
- Foreclosure: A legal process where the lender takes possession of a property due to the borrower's failure to meet mortgage payment obligations.
- First Mortgage: The primary loan secured by a property.
G
- Gross Debt Service Ratio (GDS): The percentage of a borrower's gross monthly income used to cover monthly housing costs, including mortgage payments.
H
- High-Ratio Mortgage: A mortgage with less than a 20% down payment, usually requiring mortgage insurance.
- Home Equity Line of Credit (HELOC): A line of credit secured by the equity in a borrower’s home.
I
- Interest Rate: The rate at which interest is paid by a borrower for the use of money.
- Inspection: A thorough examination of a property by a professional inspector before purchase.
J
- Joint Tenancy: A form of property ownership in which two or more parties share equal ownership and rights.
K
- Key Rate: The benchmark interest rate used by banks to set their own interest rates.
L
- Lien: A legal claim against a property, typically as security for a debt or a loan.
- Loan-to-Value Ratio (LTV): The ratio of the mortgage amount compared to the appraised value or purchase price of the property, expressed as a percentage.
- Lock-in Period: The period during which the borrower is bound by the terms of the mortgage, including the interest rate.
M
- Maturity Date: The date on which the mortgage term ends, requiring the borrower to pay off the loan or renegotiate the mortgage.
- Mortgage: A loan specifically for purchasing property, where the property is used as collateral.
- Mortgage Broker: A professional who helps borrowers find the best mortgage product and rate.
- Mortgage Insurance: Insurance that protects the lender if the borrower defaults on the loan, often required for high-ratio mortgages.
- Mortgagee: The lender in a mortgage agreement.
- Mortgagor: The borrower in a mortgage agreement.
N
- Negative Amortization: When the mortgage balance increases over time, even though payments are being made, usually due to deferred interest.
- Net Worth: The total value of an individual's financial and non-financial assets minus any liabilities.
O
- Open Mortgage: A mortgage that can be paid off, in part or in full, at any time without penalty.
- Origination Fee: A fee charged by a lender for processing a new mortgage loan.
P
- Portable Mortgage: A mortgage that can be transferred from one property to another without penalty.
- Pre-Approval: An evaluation by a lender that determines if the borrower qualifies for a loan, and for how much.
- Prepayment Option: A mortgage feature that allows the borrower to pay off the mortgage faster without incurring penalties.
- Prime Rate: The interest rate that banks charge to their most creditworthy customers.
- Principal: The amount borrowed or remaining unpaid on a loan.
Q
- Qualifying Rate: The interest rate used by lenders to assess a borrower's ability to repay a mortgage under stress conditions.
R
- Refinance: Replacing an existing mortgage with a new one, usually to get a better interest rate or to access equity.
- Renewal: At the end of a mortgage term, renegotiating the loan's terms and conditions.
S
- Second Mortgage: An additional mortgage taken out on a property that already has an existing mortgage.
- Stress Test: A calculation performed by lenders to determine if a borrower can afford their mortgage under higher interest rates.
- Survey: A document that illustrates the property boundaries and measurements, and the location of buildings and structures.
T
- Term: The length of time the current mortgage conditions, including interest rate, are fixed.
- Title: The legal document that evidences the right of ownership of a property.
- Title Insurance: Insurance that protects against losses due to defects in the title of a property.
U
- Underwriting: The process a lender uses to assess the risk of lending to a particular borrower.
V
- Variable Rate Mortgage: A mortgage with an interest rate that changes in line with the lender's prime rate.
W
- Wraparound Mortgage: A type of loan where a new, larger mortgage is created that includes the amount left on an existing mortgage.
Y
- Yield: The income return on an investment, such as interest or dividends, from a mortgage-backed security.
Z
- Zero Down Mortgage: A mortgage product that allows a borrower to purchase a home without any initial down payment.