An adjustable rate mortgage (ARM) is a type of mortgage using a varying interest rate calculated by adding a premium to a specific benchmark rate.These loans are also called variable-rate mortgages or floating-rate mortgages.
Amortization calculates how loans (like fixed-rate mortgages) are allocated towards principal and interest payments over the loan term. It may also refer to an accounting method that expenses the cost of an intangible asset over time on a company’s financial statements. Note: Amortization in accounting is covered below.
An amortization schedule is a chart that shows the amounts of principal and interest due for each loan payment of an amortizing loan.An amortizing loan is a loan that requires regular payments, where each payment is the same total amount.
A buydown, also known as paying points, is a way to lower the interest rate on a mortgage. Let's say John Doe wants to borrow $100,000 to buy a house from Jane Smith.
A cash out refinance (also called a cash out refinance loan or cash out refinance mortgage) is a type of mortgage loan that lets you to turn the equity you have in your home into cash, similar to a home equity loan or HELOC.A cash out refinance offers a low-interest way to borrow money for anything, including to pay off credit card debt, make home improvements, go to college, or buy a car. Cash out refinance loans are attractive to homeowners because they can offer annual percentage rates (APRs) that are half as high as credit cards or personal loans, which can save borrowers tens of thousands of dollars in interest charges over several years.
A down payment is the initial payment a borrower puts toward a large purchase, and is usually a specified percentage of the total purchase price.Down payments are typically used for real estate, cars and other big-ticket items that are not usually paid in full at the time of purchase; the remainder of the purchase amount is paid back over time through a loan.
In the investing world, a half-life is the halfway point of mortgage repayment. Let's say John Doe borrows $100,000 to buy a house.
Home equity equals the value of a house less the balance owed on the homeowner's mortgage. Let's assume that John Doe pays $200,000 for a house.
A home equity line of credit (or HELOC) is a flexible loan that lets you turn your home's equity into cash whenever you need it, up to a certain amount.A HELOC uses your home as collateral just like a home equity loan or cash out refinance, but works more like a credit card because it's revolving credit. HELOCs are attractive to homeowners needing cash for spending or emergencies because they offer easy accessibility with the repayment flexibility of credit cards, but with annual percentage rates (APRs) that are half as high, potentially saving the borrower hundreds or thousands of dollars in interest charges over time.
A home equity loan (HEL), also called a second mortgage, is a loan secured by the equity in a house.Equity equals the value of the house less the balance owed on the homeowner's mortgage.
A home mortgage is a loan secured for a house.The borrower is usually obligated to make a predetermined series of payments on the loan.
In the real estate world, an impound is an account that mortgage companies use to collect property taxes, homeowners insurance, private mortgage insurance and other payments that are required by the homeowner but are not part of principal and interest.Impound accounts are also called escrow accounts.
A junior mortgage is a loan secured by the equity in a house.Equity equals the value of the house less the balance owed on the homeowner's first (or in some cases, preceding) mortgages.
The loan-to-value (LTV) ratio is a calculation that helps lenders measure mortgage risk.The formula to calculate the loan-to-value ratio is: Loan to value = Mortgage amount / Appraised value of property For example, let's say Jane Doe wants to buy a house for $500,000.
Homeownership is a cornerstone of the American Dream.A home is a valuable asset for most people, and mortgages (or home loans) make buying one possible for many Americans.
Mortgage allocations refer to the specific mortgage information given to an MBS buyer by an MBS seller. Mortgage-backed securities (MBS) trade in the secondary market as to-be-announced trades.
A mortgage application is a document that a prospective property buyer submits to a lender to secure a mortgage.The lender must approve the application before any money is lent.
A mortgage banker is a person or entity who lends mortgages. A mortgage banker may be a sole agent or larger institution that originates mortgages to property buyers in exchange for a commission.
A mortgage broker is an agent who connects property buyers with mortgage lenders. A mortgage broker acts as a professional intermediary on a property buyer's behalf.
Mortgage interest is the compensation a borrower pays a lender for money used to purchase property. Mortgage interest is the percentage charged on a mortgage that must be paid in addition to the principal.
Mortgage life insurance is an insurance policy which fully repays the balance of a mortgage in the event the borrower dies. Mortgages have long-term horizons -- usually 30 years.
A mortgage rate is the rate of interest a borrower pays on his or her mortgage. Mortgage rates can be either fixed or variable.
A mortgage rate lock is the term in a mortgage contract that stipulates the rate the borrower will pay for the entire duration of the mortgage. When a mortgage originator finds a competitive rate for a borrower, the rate is based on current interest rates.
For mortgages, negative points are a strategy for qualified borrowers to decrease the amount of cash they need upfront to finance their home.A mortgage company will pay fees and closing costs on the borrower’s behalf (in the form of points) in exchange for a higher interest rate on the mortgage. Negative points are also known as rebates, yield spread premiums, or no-cost mortgages.
Private mortgage insurance (PMI), also called mortgage insurance, is what borrowers must pay on each mortgage payment if they didn't make a 20 percent down payment toward their home loan.The insurance protects the lender financially in case the borrower fails to repay.
A rate and term refinance occurs when a borrower replaces one mortgage with another mortgage that has a different maturity and interest rate. For example, let's say John Doe bought a house 10 years ago for $250,000.
A reverse mortgage is an arrangement whereby a homeowner borrows against his or her home equity and receives regular payments from the lender until the total payments reach a predetermined limit. To qualify for a reverse mortgage, a prospective borrower must be at least 62 years old and own his or her residence.
Also called a home equity loan, a second mortgage is secured by the equity in a house.Equity equals the value of the house less the balance owed on the homeowner's mortgage.
Whenever you apply for a major loan or an insurance policy, your personal data will often go before an underwriter.Although you may never meet them, these specialists have a lot of control over whether you’re approved for a mortgage or life insurance policy.
A vacation home is a house that the owner uses only a few days or weeks per year. Let's say John Doe lives in Minneapolis.