Commonly used mortgage and financing terms and definitions:
Annual Percentage Rate - The total finance charges related to a loan. This must be disclosed to borrowers by lenders under the Truth In Lending Act.
Amortized Loan - A loan in which the principal as well as the interest is payable in monthly or other periodic installments over the term of the loan.
Adjustable Mortgage Rate (ARM) - An ARM is a loan that the interest rate is periodically adjusted to coincide with current interest rates.
Balloon Payment - A final payment of a mortgage loan that is considerably larger than the required periodic payments because the loan amount was not fully amortized.
Buy down - A payment to a lender, by an interested party, to reduce the interest rate during the early years of a loan.
Capitalization Rate - Rate of return a property will produce on the owner's investment.
Equity - The interest of value that an owner has in property over and above the indebtness.
Fannie Mae - Quasi-governmental agency established to purchase any kind of mortgage loans in the secondary mortgage market from primary lenders.
Fixed Rate Mortgage - A mortgage in which the interest rate is constant for the duration of the mortgage.
Freddie Mac - A corporation established to purchase primarily conventional mortgage loans in the secondary mortgage market.
Interest - A charge made by a lender for the use of money.
Junior Lien - An obligation, such as second mortgage, that is subordinate in right or lien priority to an existing lien on the same realty.
Mortgage - A conditional transfer or pledge or real estate as security for the payment of a debt.
Principle - The original loan amount of the total due and payable at a certain date.
Satisfaction of Mortgage - A document acknowledging the payment of a mortgage debt.
Take Out Loan - Permanent financing of real estate after the completion of construction.
Title Insurance - A policy insuring the owner or mortgagee against loss by reason of defects in the title to a parcel of real estate, other than encumbrances, defects, and matters specifically excluded by the policy.