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It can be confusing to understand all the mortgage terms used when purchasing your home. If you’re not up on the lingo and abbreviations, it can feel like it’s a completely different language. Here’s a few payment terms that you should be familiar with before applying for your mortgage:
- Amortization: The gradual repayment of a mortgage loan, both principal and interest, by installments.
- Amortization Term: The length of time required to amortize the mortgage loan expressed as a number of months. (ie. 360 months is the amortization term for a 30-year fixed-rate mortgage)
- Closing Costs: Expenses over and above the price of the property that are incurred by buyers and sellers. This can include:
- Origination Fee: A fee paid to the lender for processing a loan application. Stated in points. 1 point=1% of the mortgage amount.
- Escrow: A financial arrangement where a 3rd party holds and regulates payment of the funds required for two parties involved in a transaction. For example, the deposit of funds into an escrow account will be disbursed upon the closing of a sale of real estate.
- Deposit: Sum of money given to bind the sale of real estate, or a sum of money given to ensure payment or an advance of funds in the processing of a loan.
- Down Payment: Part of the purchase price of a property that is paid in cash and not financed.
- Escrow Disbursement: The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.
- Escrow Payment: The part of your mortgage payment that is held by a servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due.
- Interest: The fee charged for borrowing money.
Interest Accrual Rate: The % rate at which interest accrues on the mortgage.
- PITI: The four components of a monthly mortgage payment.
- Principal: The part of your monthly payment that reduces the remaining balance of the mortgage
- Interest: Fee charged for borrowing money
- Taxes and Insurance: Monthly cost of property taxes and homeowners insurance
- Prepayment Penalty: A fee that may be charged to a borrower who pays off a loan before it is due.
- Refinance: Paying off one loan with the proceeds from a new loan using the same property as security.
Have questions about your mortgage or interested in refinancing? Lendello’s team of well-trained Mortgage Consultants can help! Reach out to us today.