ACCELERATION CLAUSE:
A clause in a mortgage or loan. If the borrower fails to live up to her obligations under the mortgage, the lender has the legal right to demand that the full principal of the mortgage may become due and payable immediately upon the failure.

ACCRUED:
An adjective describing something that has come into existence but has not yet been claimed by or distributed to its rightful owner.

ACCRUED INTEREST:
Interest which has already been earned but has not yet been paid.

ACT OF GOD:
When used in insurance policies, an event caused by natural forces such as rain, lightning, floods or earthquakes which results in damage to property or chattels.

ADC LOAN:
A loan that finances the three major phases of a land development project: (i) acquisition, (ii) development and (iii) construction.

ADDITIONAL PRINCIPAL PAYMENT:
A one-time or lump-sum payment made by a borrower in addition to the regular payments on a loan or mortgage which reduces the principal owing on the debt.

ADJUSTABLE RATE MORTGAGE (ARM):
Also known as a Variable Rate Mortgage, a loan secured against land which has an interest rate that changes according to some outside index -- such as the federal prime rate or the interest rate paid on government bonds -- over the term of the mortgage. The change in interest rate will result in a change in the periodic payments due under the mortgage.

ADJUSTMENT DATE:
Mortgage term usually preceded by the word "Interest" (i.e. "Interest Adjustment Date"). The date soon after the completion of a purchase and mortgage transaction on which the borrower must make a payment of accumulated interest only, usually used to place the periodic payment dates for the mortgage at the first day of the month (i.e. you borrow on March 18, your interest adjustment date is April 1 and your first regular monthly payment is May 1).

ADJUSTMENT INTERVAL:
Also known as Adjustment Period. The period of time (i.e. week, month, year) between changes in the interest rate charged on a adjustable-rate mortgage.

ADJUSTMENT PERIOD:
See Adjustment Interval.

ADVANCE:
Verb: to deliver a portion of money borrowed under a mortgage or loan before the loan instrument requires the money to be delivered.
Noun: the money so delivered.

ALIENATION CLAUSE:
A term of a mortgage which allows the creditor to demand payment in full of principal and interest due upon the sale of the property.

AMORTIZATION:
The preparation of a payment plan for a loan which allows for equal payments to be made to the creditor at consistent intervals over the life of the loan (the amortization period). Each payment covers interest accrued over the interval period with the remainder of the payment being applied to reduce the principal owed. If every payment is made on time and in full over the amortization period, the loan will be completely repaid at the end of the amortization period.

AMORTIZATION SCHEDULE:
The printed table of the payments to be made on an amortized loan showing the date and amount of each payment, the amount of each payment which will be applied to interest and to principal and the balance of principal still outstanding on the loan after the payment is made.

ANACONDA MORTGAGE:
A specific kind of mortgage. Contains a clause that states that it secures all debts owed to the mortgagee by the mortgagor and applies to rules of the mortgage to all such debts. Clause is also known as a Mother Hubbard clause.

ANNUAL DEBT SERVICE:
The total amount required to service a loan in a given year.

ANNUAL LOAN CONSTANT:
Ration of Annual Debt Service to original principal of the loan. Also known as a mortgage constant.

ANNUAL MORTGAGOR STATEMENT:
Document sent by the lender to the mortgagor each year which sets out amounts paid for principal, interest and taxes in the given year and the amount still owing on the principal of the mortgage at the end of the year.

ANNUAL PERCENTAGE RATE (A.P.R.):
A rate designed to allow for the comparison of one type of loan to another. The annual cost of borrowing under a given form of loan (includes in the calculation compounded interest, cost of borrowing etc.). Required to be disclosed by the lender under the American Truth in Lending Act, Regulation Z.

APPLICATION:
A form filled out in order to allow a lender to consider a person for a mortgage or loan. Will contain personal and financial and personal information on the applicant.

APPLICATION FEE:
The fees the lender charges the applicant. May include costs of a property appraisal and a credit report on the applicant. May be payable by applicant even if loan is not approved.

APPRAISAL:
An estimation of the value of a property on a certain date given by a qualified person, usually after an inspection of the property.

APPRAISAL PRINCIPLES:
Elements to be considered by an appraiser in appraising the value of a property, such as competition, supply and demand.

APPRAISAL PROCESS:
A standardized approach to appraising a property, to allow for accuracy and consistency.

APPRAISAL REPORT:
Documentation to support an appraisal of a property. Varies in length but sets out elements considered, positive and negative aspects of property etc.

APPRAISED VALUE:
The estimated market value of a property on a given date, given by a qualified person as a result of an inspection of the property and a consideration of other market forces.

APPRAISER:
A professional who has been trained to assess the value of property.

APPROACHES TO VALUE:
Different methods by which appraisers estimate the value of a property. Include: (1) cost approach, (2) comparison approach, and (3) income approach.

ARREARS:
Money which is not paid when due, under a payment plan or amortization schedule. Could lead to enforcement of loan agreement by lender

ASSIGN:
To transfer interest in a property, contract, right etc..

ASSIGNEE:
The person to whom an interest is transferred. An assignee of an Agreement of Purchase and Sale may buy the property and enforce the contract in the same fashion as the original party.

ASSIGNMENT:
The transfer of any right, claim or interest to another person or corporation. Often used to refer to the transfer of a mortgage from one lender to another. Also a noun describing the document which represents the assignment of the right etc.

ASSIGNOR:
The person who assigns a right or interest to another person.

ASSUMABLE MORTGAGE:
A mortgage that can be taken over ("assumed") by the buyer when a home is sold. If interest rates have risen, an assumable mortgage at a low rate may prove a selling point for the property.

ASSUMPTION CLAUSE:
The paragraph in the mortgage which sets out the borrower's right to have the mortgage assumed by a purchaser.

ASSUMPTION FEE:
A charge levied by the lender (usually against the party assuming the mortgage) for the privilege of assuming a mortgage. May be a fixed amount or a percentage of outstanding principal on the mortgage at the time of the assumption.

ASSUMPTION OF MORTGAGE:
The agreement of a purchaser to take on personal liability for a mortgage already registered on title to the property and to make payments under the mortgage. Purchaser takes the place of the vendor in the contract with the lender.

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BACK END RATIO:
A comparison of a borrower's monthly expenses to her gross monthly income used to assess her ability to carry a mortgage or other loan.

BALANCE:
Often as in "balance due," the amount of principal on a loan remaining to be paid at any given time.

BALLOON (LOAN) MORTGAGE:
A loan which is repaid by a series of small, periodic payments until a given date, when either the balance comes due in a single, large payment or the amount of the payments rises significantly.

BALLOON PAYMENT:
The single, large payment which pays out the balance due on a balloon mortgage.

BIWEEKLY LOAN OR MORTGAGE:
A loan which features payments equaling one half of the usual monthly payment made every two weeks (to total 26 in a year), thus substantially reducing the life of the mortgage and the interest payable over the life of the mortgage.

BLANKET MORTGAGE:
Where one loan is secured against more than one parcel of land.

BLENDED RATE:
Created when an old loan is refinanced and extended at an interest rate which is different from the original rate: the old debt is still payable at the old rate; the new debt is payable at the new rate; the total amount of the debt is payable at a rate of interest that is somewhere between the two rates.

BORROWER (MORTGAGOR):
The person or company that receives money from a lender (often a bank, credit union or trust company) in exchange for a written promise to pay and a registered lien on property.

BRIDGE FINANCING:
Also known as a "swing loan," a loan used to fill a gap in financing, often between the purchase of a new home and the sale of the old one. If the purchase closes before the sale, the home owner needs to borrow enough money to pay for the new house for the period of time before the equity in his old house comes available as a result of the completion of the sale.

BUDGET MORTGAGE:
A mortgage in which the borrower is required to make periodic payments not only for interest and principal, but also for insurance premiums and realty tax installments.

BUY DOWN (ACCOUNT OR MORTGAGE):
The payment of extra money on a loan now so as to reduce the interest rate over a given period or over the life of the loan. This extra payment may be made by the borrower, by the lender (as an incentive to the borrower to borrow from the lender) or by the vendor/builder (as an incentive to the borrower to buy a certain property). 

CALL OPTION (PROVISIONS, RIGHTS):
A lender's right to demand payment of the outstanding balance of the loan at a time specified in the loan agreement.

CAP:
A limit. In variable rate mortgages, a limit as to how high periodic payments may go or how much the interest may change within a given time period or over the life of the mortgage.

CASH RESERVE:
An amount of money that the purchaser of a property still has after the transaction closes. Some lenders require a certain level of cash reserve (equal to two payments) before granting a mortgage.

CASH-OUT REFINANCE:
When an owner renegotiates or negotiates a new mortgage and the proceeds of the new financing exceed the money required to pay out the old mortgage and any other costs, liens or expenses, leaving money for the borrower.

CEILING:
The limit over which the interest rate on a variable rate mortgage may not rise over the life of the loan.

CERTIFICATE OF ELIGIBILITY:
Document issued by the Department of Veteran's Affairs to qualifying veterans which entitles them to apply for subsidized or guaranteed loans.

CERTIFICATE OF REASONABLE VALUE (CRV):
Document issued by the Department of Veterans Affairs (VA). Based on an appraisal, sets out market value of a particular property for the purposes of establishing maximum principal amount available for a VA mortgage on the property.

CERTIFICATE OF SATISFACTION:
Document registered on title which provides evidence from the lender that a loan instrument (deed of trust, mortgage, other lien) has been paid out and released.

CERTIFICATE OF VETERAN STATUS:
Document issued by Department of Veteran's Affairs confirming that the person named in the Certificate has served at least 90 days of continuous active duty (including training time) and is eligible for certain VA benefits (such as a VA mortgage).

CHANGE FREQUENCY:
Term describing the period of time between changes in the interest rate and/or payments of a variable rate (adjustable rate) mortgage or loan (i.e. one week, one month etc.).

CHATTEL MORTGAGE:
A debt secured against items of personal property rather than against land, buildings and fixtures.

CLOSED MORTGAGE:
A land loan that cannot be prepaid or re-negotiated before the end of its term without the payment of an interest penalty.

CLOSED-END MORTGAGE:
A mortgage with a set principal amount which cannot be inNARsed or extended during the life of the mortgage.

COLLATERAL:
Property (real or personal) which is pledged to secure a loan or mortgage. If the debt is not paid, the lender has the right to sell the collateral to recoup the outstanding principal and interest on the loan.

COLLATERAL MORTGAGE:
A loan which is secured by some sort of written note of indebtedness (such as a Promissory Note) which is secondarily secured by a mortgage registered against a property.

COLLECTION:
The act of pursuing a debtor who is delinquent on his loan payments.

CO-MAKER:
Also known a guarantor. Someone who signs a loan document along with the principal borrower, pledging to be responsible for the loan should the borrower fail to pay it.

COMMITMENT:
A promise, usually in writing, to provide a mortgage or other loan. May also be used in insurance field. Sets out details of mortgage, insurance. Often referred to as Commitment Letter or Binder.

COMMITMENT FEE:
The fee charged by the lender to commit itself to a mortgage or loan on specific terms.

COMMUNITY HOME BUYER'S PROGRAM:
Program established to find creative ways to finance home purchases for people with modest income.

COMMUNITY HOME IMPROVEMENT MORTGAGE LOAN:
A loan for up to 95% of the value of the property to allow persons of modest income to become homeowners or to make improvements to their existing homes.

COMPOUND INTEREST:
As opposed to simple interest. The accumulation of interest on a loan over time where interest is charged not only on the principal of the loan but also on all interest accrued against the principal to the end of the last compound period.

CONSTANT PAYMENT LOAN:
A type of loan which requires equal, periodic payments over a certain term, at the end of which the amount owing under the loan will be completely paid out.

CONSTRUCTION LOAN:
A structured, short-term loan to a builder or developer to allow for the development of land. Funds are advanced at certain stages of the development project to pay for specific expenses, fees or costs.

CONSUMER REPORTING AGENCY (OR BUREAU):
Also known as Credit Bureau. The source to which the banks or other lenders turn for information on the credit history of an applicant.

CONVENTIONAL LOAN:
1. A loan or mortgage to which the normal rules of such transactions apply without the inclusion of a government program (i.e. VA or FHA insurance).
2. A loan or mortgage with a fixed interest rate, fixed payments and a fixed term.

CONVERSION CLAUSE:
A provision in a variable rate mortgage (adjustable rate mortgage) which allows the borrow to change the mortgage to a fixed rate mortgage upon the occurrence of certain events.

CONVERTIBILITY CLAUSE:
See "Conversion Clause".

COVENANT:
A promise contained in a contract or agreement.

CREATIVE FINANCING:
An arrangement for the financing of the purchase of a property which is outside the normal practice of residential financing.

CREDIT:
1. The ability to access money, to use money prior to earning it.
2. The accounting term for a liability or for equity, entered on the right side of the ledger.
3. As a verb, to allot for the benefit of a person (i.e. You must credit the Purchaser on closing for the deposit paid).

CREDIT HISTORY:
A statement of the debts and obligations, whether current or past, of a person which helps a lender to assess the risk of a loan to that person.

CREDIT LIFE INSURANCE:
A form of insurance which is designed specifically to pay out the debts of the insured person in case of their death.

CREDIT LIMIT:
The maximum amount available to a person under a loan, credit card or other borrowing arrangement.

CREDIT RATING:
Based on an analysis of a person's credit history, an evaluation of that person's ability to manage a new debt or debts overall.

CREDIT RISK:
The potential for a borrower to fail to live up to her obligations under a loan arrangement.

CREDITOR:
Any person to whom money is owed. May be secured (the debt has been registered against the property of the debtor) or unsecured.

CUMULATIVE INTEREST:
The total amount charged as interest on a loan or mortgage to a certain date.

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DATE OF APPRAISAL:
The precise day, month and year upon which an assessment of the value of a property has been given.

DEBT:
1. An obligation to another person.
2. That obligation which is created by borrowing.
3. The total of all financial obligations of a person or corporation.

DEBT COVERAGE RATIO (DCR):
A comparison of the net income of a property with the cost of payments (principal and interest) on the mortgage on the property, used to assess the ability of the property to generate enough income to pay for itself.

DEBT EQUITY RATIO:
A comparison of the amount owing on a property with the equity (value of property minus amount owing).

DEBT FINANCING:
Paying for the purchase of a property with credit.

DEBT RATIO:
Also known as Debt-to-Income ratio. A comparison of the total monthly payments of all of the borrower's debts (including the mortgage) with the gross monthly income of the borrower, used to assess borrower's ability to pay mortgage.

DEBT SERVICE:
The mortgage payment for a given period of time.

DEBTOR:
A person who has borrowed and therefore owes (opposite of Creditor).

DECREE OF FORECLOSURE:
An order of the Court setting out the amount outstanding on a delinquent mortgage and ordering the sale of the property to pay the mortgagee.

DEED IN LIEU OF FORECLOSURE:
A legal instrument in which a borrower conveys property to a lender under a mortgage to save the expense of foreclosure. See also quit-claim deed.

DEDUCTION:
An amount of money held back by the lender from the mortgage advance. Could be for appraisal fee, commitment fee, interest adjustment or for realty tax account.

DEED OF RELEASE:
A legal instrument signed by lien claimants or mortgagees which gives up their claim to the property. See Discharge.

DEFAULT:
Failure. In mortgages, the failure to make payments in full, on time or at all or to live up to any other obligations placed on the borrower by the loan agreement.

DEFEASANCE CLAUSE:
A clause in a mortgage which ensures that, once the borrower has met all of her obligations under the terms of the mortgage and paid out the entire principle and interest borrowed, the lender's legal interest in the property is extinguished.

DEFERRED INTEREST:
Interest which is not paid as it accumulates but which is added, instead, to the loan principle.

DEFERRED INTEREST MORTGAGE:
A technique for reducing the amount of each periodic payment on a mortgage monthly by postponing the payment of a portion of the interest until a certain date in the future (or to when the property is sold), at which time the interest postponed is added to the principle owing.

DEFICIENCY JUDGMENT:
A Court order against a borrower under a mortgage to pay to the lender an amount sufficient to make up for the difference between what the borrower owes under the mortgage and the amount the lender sold the property for under a mortgage remedy action.

DELINQUENCY:
The condition of being late on a payment but not yet in default.

DEMAND LOAN:
A type of loan where the lender may require payment in full of the principal (and accumulated interest) at any time.

DEPARTMENT OF VETERANS AFFAIRS (VA):
An independent federal agency which oversees programs for military veterans, including loan and mortgage programs.

DEPOSIT OF TITLE DEEDS:
When a lender requires ownership documents to be left with it as further security for a loan.

DEVELOPMENT LOAN:
A loan specifically designed to finance the transformation of a vacant tract into a new survey. May provide for money to be advanced as the stages of the development are completed.

DIRECT REDUCTION MORTGAGE:
A kind of mortgage where the principal and interest to be paid are based on the principal remaining. An amortized mortgage.

DISCHARGE:
1. A document registered to remove a mortgage from title to a property.
2. To payout out a debt.
3. To meet one's obligations.

DISCLOSURE STATEMENT:
A document issued by a lender to a borrower in which the lender sets out the terms and conditions of the loan. Often required under legislation.

DISCOUNT:
A sum of money held back from a mortgage advance as prepared interest.

DISCOUNT POINT:  

See point. Each point is equal to 1% of the principal.

DISCOUNT RATE:
A benchmark for interest rates, the rate charged by the Federal Reserve System on loans to banks.

DISTRESS:
The right of a party to sell the real or personal property of another party to pay for arrears in rent or loan payments.

DISTRESSED PROPERTY:
A property which is to be sold as a result of payment arrears on a mortgage.

DOWN PAYMENT:
The amount of money provided by the Purchaser toward the total price of the property (not including legal fees or other acquisition costs). In general, down payment plus mortgage equals purchase price.

DRAGNET CLAUSE:
A term of a mortgage which establishes the subject property as security for the present and for all future debts of the owner to the lender.

DRY MORTGAGE:
Also known as "non-recourse loan" because the lender has no personal right of action against the property owner in the event of default. The lender may only sell the property to enforce the loan obligation.

DUE DATE:
The date established in the loan agreement upon which all moneys then outstanding on the loan become due and payable in full.

DUE ON SALE CLAUSE:
A clause in a mortgage which requires that the mortgage be paid out in full upon the sale of the property against which it is secured. A mortgage with this clause may not be assumed by a purchaser.

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EFFECTIVE GROSS INCOME:
1. For borrowers, the actual amount of money earned from stable sources over a set period (i.e. a month) before taxes and expenses are deducted.
2. For rental properties, the amount of income the property will produce if leased at market value before costs, taxes, upkeep and discounts for vacancy are deducted.

EFFECTIVE RATE:
The actual rate (or interest or return) once all factors are accounted for (factors include compounding of interest or costs of earning the return).

ENTITLEMENT:
1. The legal right to a benefit or program.
2. Name for the VA home loan benefit.

EQUITY:
The difference, in dollars, between the market value of a property and the principal owing on debts secured against the property. The amount of money the owner will be able to keep from a sale transaction once the mortgages are paid out. Also known as "owner's interest."

EQUITY BUILDUP:
The increase over time of the owner's interest in a property, the difference between the value of the property and the amount owed on the mortgage.

EQUITY LOAN:
A loan to a home owner secured against the equity the owner enjoys in the property.

EQUITY OF REDEMPTION:
The right a borrower has to pay out in full a mortgage against a property that has gone into foreclosure or power of sale proceedings, thus redeeming the property.

ESCROW COLLECTIONS:
Moneys taken in by the agent and set aside for future payments as required by the contract (i.e., in a mortgage situation, for taxes, insurance, etc. on the property). Also known as "escrow deposits," "impounds" or "reserves."

ESCROW DEPOSIT:
Similar to "escrow collections," the deposit of funds for the purpose of future payments required under the contract.

ESCROW DISBURSEMENTS:
The payment out of escrow funds of taxes, insurance, etc. as required by the contract. Also known as "escrow payments."

ESCROW REIMBURSEMENT:
The return to the borrower of left over funds held in escrow once the debt has been paid out.

EXCULPATORY CLAUSE:
The term of a mortgage giving the borrower the right simply to surrender the property to the lender as payment for the loan without personal liability to the borrower for any shortfall.

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FACE RATE OF INTEREST:
The rate of interest chargeable on a loan as set out in the loan document.

FACE VALUE:
The value of an item as set out in the instrument creating it or representing it.

FAIR CREDIT REPORTING ACT:
A law which standardizes the form and rules of disclosure of credit reports created by consumer/credit reporting agencies and establishes procedures the correction of errors on a person's credit report.

FANNIE MAE:
The U.S.'s largest supplier of mortgages to home buyers and owners, a corporation established by Congress. the Federal National Mortgage Association (FNMA).

FARM MORTGAGE:
A mortgage secured against agricultural land.

FARMER'S HOME ADMINISTRATION (FMHA):
U. S. Department of Agriculture agency providing financing for farmers, residents of rural areas, etc.

FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC):
A U.S. Government agency providing insurance to depositors of money into financial institutions up to a certain amount.

FEDERAL HOME BOARD:
U.S. board that regulates federal savings and loan associations.

FEDERAL HOUSING ADMINISTRATION (FHA): Division of the Department of Housing and Urban Development, sets standards for the underwriting private mortgages. Also insures residential mortgages made by private lenders.

FEDERAL LAND BANKS: Local banks providing long-term mortgages to farmers and owners of agricultural lands.

FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA):
See "Fannie Mae."

FEDERAL RESERVE BANK:
One of a set of twelve banks servicing one of twelve reserve districts in the U.S.A.

FEDERAL RESERVE SYSTEM (FRS):
The central bank of the United States, controls supply of money, credit availability and benchmark interest rates. Made up of the twelve Federal Reserve Banks.

FEE APPRAISER:
A person estimates the value of a property for a fee.

FEES:
1. The money required at the outset by a lender from the borrower or held back from the mortgage advance.
2. The amounts charged by a professional for services rendered.

FIFTEEN-YEAR MORTGAGE:
A loan with payments amortized over a fifteen-year period, rather than the usual twenty-five-year amortization period.

FINAL VALUE ESTIMATE:
The product of a real estate appraiser's completed work, an assessment of the value of a property based on all factors and taking into consideration the different evaluation methods available.

FINANCE CHARGE:
The total cost, in dollars, of a loan or mortgage over its life, including appraisal/application/commitment fees, financing insurance, interest paid over the life of the loan.

FINANCIAL INSTITUTION:
A generic term for banks, trust companies, credit unions, and perhaps other investment companies that deal with money, hold money, invest money and lend money.

FINANCIAL RISK:
An assessment of the possibility that a given investment or loan will fail to bring a return and may result in a loss of the original investment or loan.

FINANCIAL STATEMENT:
A document which sets out the assets, income, expenses and debts of a person or company to allow a third person to assess that person or corporation's financial health (i.e. when considering lending money to that person or corporation).

FINANCING:
The manner in which a proposed purchaser intends to make up the difference between cash on hand and the purchase price.

FINDER'S FEE:
Commission paid to a mortgage broker for placing a mortgage with a specific institution.

FIRM COMMITMENT:
A promise from a lender to lend a specific borrower a specified amount of money on specified terms to be secured against a specific property.

FIRST MORTGAGE:
A mortgage that, when registered, is first in line on the property, giving the lender superior right to the proceeds of the sale of the property over other, later claimants.

FIXED INSTALLMENT:
The periodic payment made for principal and interest on a loan.

FIXED RATE MORTGAGE (FRM):
A loan registered on title to the property against which it is secured which charges an interest rate that does not change over the term of the mortgage.

FLOATING RATE:
Rate of interest chargeable on a loan that is variable according to a specified index or the national prime rate. The loan rate is said to "float" on top of the specified index by a set amount: i.e. the loan may be set at Prime Rate 2%, meaning if the Prime Rate is 6%, the loan interest rate will be 8%.

FLOOR:
The lowest the interest rate on a variable or adjustable rate mortgage may go.

FNMA (FANNIE MAE):
The largest single lender on residential properties in the United States, generally purchases mortgages from primary lenders.

FORECLOSURE:
An enforcement process in which the lender under a defaulted mortgage takes title to the property for the purposes of selling it to recoup moneys owed under the mortgage.

FORFEITURE:
The loss of a right, claim, interest or item of property as a result of one's failure to meet one's legal obligations.

FORM REPORT:
A standardized appraisal document which requires the appraiser to present her findings in a prescribed form.

FORWARD COMMITMENT:
A lender's promise to make a loan in the future.

FREDDIE MAC (FHLMC):
Federal Home Loan Mortgage Corporation. A U.s. agency which purchases first mortgages on residences.

FRONT-END RATIO:
A comparison of a borrower's monthly cost of housing with that borrower's monthly gross income.

FRONT-END FEE:
A lender's charges to the borrower for the costs of the borrower's application for the loan.

FULLY AMORTIZING PAYMENT:
A periodic mortgage payment which, if paid consistently throughout the amortization period of the mortgage, will result in the total principal and interest owing on the loan being retired at the end of the amortization period.

FULLY ASSUMABLE MORTGAGE:
A land loan that may be transferred to a new owner without any change to the terms, as long as the new owner qualifies.

FULLY INDEXED INTEREST RATE:
The interest rate as set out in the variable or adjustable rate mortgage, equaling the index rate plus the float of the mortgage.

FUNDING FEE:
The charge paid by the borrower to the VA for the mortgage insurance provided by the VA on a veteran's mortgage.

FUTURE ADVANCES:
Monetary payments under an already registered mortgage as a result of the occurrence of certain events, as in a construction loan where more money is advanced once the framing is completed, etc.

GI LOAN:
Also known as "VA loan."

GINNIE MAC (GNMA): Government National Mortgage Association. Assistance in obtaining purchase mortgages.

GOOD FAITH ESTIMATE: A written statement of the anticipated costs of completing a loan transaction which must be provided by a lender to a borrower within 72 hours of the submission of the loan application.

GRACE PERIOD:
The time a borrower is allowed after a payment is due to make that payment without incurring penalties.

GRADUATED PAYMENT MORTGAGE (GPM):
A land loan in which the periodic payments increase at a stated rate over a stated period of time before leveling off for the remainder of the term of the loan.

GRADUATION PERIOD:
The interval between increases in the payments on a GPM.

GRADUATION RATE:
The rate at which the payments increase in a GPM, expressed as a percentage.

GROSS INCOME:
A person's earnings from all sources in a given period before expenses are deducted.

GROSS MARGIN:
The difference between the interest rate chargeable on a variable or adjustable rate mortgage and the rate set by the index rate upon which the mortgage rate is based.

GROWING-EQUITY MORTGAGE (GEM):
A mortgage with a fixed interest rate which has periodic payments which increase at intervals, the added money per payment being applied directly to the outstanding principal on the mortgage.

GUARANTEE:
1. An enforceable warranty on the continuing usefulness of a product,
2. An agreement by a third party to a loan transaction to join in the transaction and to be held liable for the moneys secured by the loan instrument should the principal debtor fail to pay.

GUARANTEE MORTGAGE:
A land loan that has a third party added to provide added assurance that the obligations under the loan will be met.

GUARANTY FEE:
Fannie Mae's fee for insuring a mortgage

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HIGH RATIO MORTGAGE:
A mortgage in which the amount of monies borrowed is equal to or greater than 75% of the purchase price/appraised value of the property against which it is secured. Will require some sort of insurance, usually provided by a government agency.

HISTORICAL SCENARIO:
An attempt to predict the interest rate fluctuations of a Variable or Adjustable Rate Mortgage on the basis of the behavior of interest rates in a previous period.

HOLDBACK:
A percentage of a contract price which is retained by a contractor or lender until the project is complete and all bills for that project are paid. The percentage may be set by custom or by statute.

HOME EQUITY CONVERSION MORTGAGE (HECM):
Also known as a "reverse mortgage," a loan designed specifically for people without income but with a great deal of equity in their home (i.e. retired people. The loan may require periodic payments or may simply accumulate interest on the original principal until the property is sold (by the borrower or after the death of the borrower).

HOME EQUITY LINE OF CREDIT:
A special kind of loan (also known as a "revolving loan") which is secured against a property and allows the owner to borrow and repay money at her leisure. Periodic payments of at least accumulated interest are required but the loan is fully open: may be paid out in whole or in part at any time and, if there is still money available under the loan ceiling, the borrower may take more money for her use.

HOME IMPROVEMENT LOAN:
A loan made for the purposes of making improvements to a property.

HOMESTYLE MORTGAGE LOAN:
A mortgage specifically designed to allow owners to improve their existing homes.

HOUSE-POOR:
A description of the state of having very little disposal income after paying the financing and carrying costs of one's home.

HOUSING AND URBAN DEVELOPMENT (HUD):
Federal Agency charged with the duty of overseeing a number of enactments relating to housing in America.

HOUSING ASSISTANCE COUNCIL (HAC):
Funded by HUD, an agency designed to support low-income housing development in rural areas.

HOUSING EXPENSE RATIO:
A comparison of a family's monthly gross income with the carrying costs of their home.

HOUSING FINANCE AGENCY:
State body whose function is to provide loans to citizens who cannot obtain home ownership loans through normal channels.

HUD:
See "Housing and Urban Development."

HUD I SETTLEMENT STATEMENT:
The form in which the costs of purchasing a home are itemized.

HUD MEDIAN INCOME: Used in determining eligibility for various HUD programs, the average income for a family in a specific area.

HUD-1 STATEMENT:
See "HUD I Settlement Statement."

HYBRID MORTGAGE:
A form of mortgage in which the compensation to the lender may include receiving income directly from the use of the property.

HYPOTHECATE:
To pledge as security for a mortgage an asset of which the pledgor retains possession (i.e. the dwelling upon which a mortgage is registered).

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IMPOUND:
The portion of a borrower's periodic payment on a loan that is collected to pay for items other than principal, interest or penalties (such as realty taxes, insurance premiums, etc.).

IMPOUND ACCOUNT:
The trust account held by a lender into which payments for insurance, taxes, etc., paid by the borrower are placed prior to being disbursed by the lender.

IMPUTED INTEREST:
Interest which is deemed to have been charged on a loan by a court.

IN REM:
Latin term meaning "Against the thing." Used to describe a legal action which is taken against land rather than against the land owner, such as a bank's foreclosure on a defaulted mortgage.

INDEPENDENT APPRAISAL:
An estimate of the value of a property prepared by someone who has no interest in the property or, if a mortgage is involved, in the lender.

INDEX:
Any rate published by an independent third party (the government, the federal bank, etc.) which serves as the base for calculating a variable item in a contract. (A Variable or Adjustable Rate Mortgage may use the Federal Bank's monthly prime interest rate as the index for the interest charged under that mortgage).

INDEXED LOAN:
Any loan whose interest rate is adjusted in accordance with a rate published by an independent third party (an "index").

INITIAL INTEREST RATE:
The rate chargeable on a mortgage on the day it is signed.

INITIAL RATE PERIOD:
The period of time for which the "initial interest rate" is guaranteed on a Variable or Adjustable Rate mortgage before it begins to change according to its "index."

INSTALLMENT:
A regular periodic payment.

INSTALLMENT CONTRACT: Same as land contract

INSTALLMENT LOAN:
A loan which is paid back in periodic payments.

INSTALLMENT SALE:
The sale of a property with the Vendor taking back a mortgage from the purchaser and paying the taxes on the sale proceeds as they are collected.

INSTITUTIONAL LENDER:
An accredited financial organization (i.e. a bank, trust company, credit union, etc.) which offers loans.

INSTITUTIONAL MORTGAGE:
A loan secured against real property offered to the land owner by a bank, credit union, trust company or other accredited financial organization. Opposite of "private mortgage."

INSURED CLOSING LETTER:
A promise by a Title Insurance Company to a lender to pay for all costs and losses to the lender which might result from the actions of the Company's closing agent while closing a transaction.

INSURED MORTGAGE:
A loan secured against land for which an insurance policy exists promising to compensate the lender for all losses and costs resulting from the borrower's failure to meet her obligations under the loan agreement.

INTEREST:
The cost of borrowing money, charged as a percentage of the outstanding amount owed.

INTEREST ACCRUAL RATE:
The rate, stated as a percentage, at which interest accumulates on a mortgage.

INTEREST PAYMENT:
The portion of each periodic payment on a loan, expressed in dollars, which is allocated toward accrued interest.

INTEREST RATE ADJUSTMENT PERIOD:
The length of time between changes in interest rate on an Adjustable or Variable Rate Mortgage.

INTEREST RATE BUY DOWN PLAN:
A method of reducing the effective interest charged to a borrower. A third party (often a vendor) deposits a lump sum into an account, portions of which are then used to reduce the amount required from the borrower for each periodic payment over a set period of time.

INTEREST RATE CAP:
A clause in an Adjustable or Variable Rate Mortgage which limits the change in the interest rate charged. May limit change within a single adjustment period or over the life of the mortgage.

INTEREST RATE CEILING:
The highest rate of interest chargeable under a Variable or Adjustable Rate Mortgage, as set out in the mortgage contract.

INTEREST RATE FLOOR:
The lowest rate of interest chargeable under a Variable or Adjustable Rate Mortgage, as set out in the mortgage contract.

INTEREST-ONLY LOAN:
A debt for which the periodic payments are enough to pay only the interest which accumulates on the principal over the payment period. Principal is due at maturity.

INTERIM FINANCING:
1. A construction loan to pay for costs up to completion;
2. Another name for a bridge loan, a short-term loan designed to cover a gap of time between the purchase of a new home and the sale of the old when equity becomes available.

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JOINT TENANCY:
A way in which two or more people may hold title to property together. Owning as joint tenants means each owner has an equal right to the entire property, that none of the owners may sell, bequeath or encumber their portion of the property without the consent of the other owners and that, in the event of the death of one of the owners, the surviving owners automatically retain title to the entire property by "Right of Survivorship." Compare with "tenants in common."

JOINT TENANTS:
See "joint tenancy."

JUDICIAL FORECLOSURE:
An enforcement action by a lender, the act of selling the property to recover the mortgage debt after obtaining judgment of a court.

JUMBO LOAN (MORTGAGE):
A loan for more money than the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation will fund under its mandate.

JUNIOR LIEN (MORTGAGE):
A claim against property which is behind at least one other lien in priority.

JUNK FEES:
Slang term for extra fees charged by a lender on a mortgage loan.

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KICKER:
Additional compensation for a lender or investor, the right to share in the income from the property in addition to payments of principal and interest. Also known as "equity kicker" or "lender participation."

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L/V:  

Short form for "Loan-to-value ratio."

LATE CHARGE:
A fee or penalty to be paid to a lender for a payment which is delivered after it is due.

LEASEHOLD MORTGAGE:
A loan secured against a tenant's interest in a property.

LENDER:
Any individual or company which provides money to third parties in return for periodic payments of interest and principal over time.

LENDER OPTION COMMITMENTS:
A contract between a lender and potential borrower which allows a lender to provide certain loans at certain times on terms set out in the contract but also allows the lender to choose not to provide such loans.

LENDER'S TITLE INSURANCE:
A policy of Title Insurance which covers the interest of a lender on a mortgage registered on title to a property.

LETTER OF COMMITMENT:
See "commitment."

LETTER OF CREDIT:
An agreement between a bank and a borrower which allows the borrower to use money on the bank's credit.

LEVEL-PAYMENT MORTGAGE:
A land loan which requires regular, even payments.

LIFE CAP:
The maximum interest rate chargeable under an adjustable or variable rate mortgage over its life.

LIFETIME PAYMENT CAP:
The maximum increase or decrease in the amount of each periodic payment allowable over the life of an adjustable or variable rate mortgage.

LINE OF CREDIT:
A very flexible form of loan in which the lender agrees to make a certain amount of money available to the borrower at a certain rate of interest. The borrower may use as much of the amount available as she wishes and may pay out all or any part of the amount owing at any time or re-borrow such funds at her leisure.

LOAN:
See also "mortgage." A transfer of money or other property from one party to another upon the expectation that the money or other property will be returned (often with additional payments as well).

LOAN APPLICATION:
The form completed by a potential borrower which provides information the prospective lender requires to assess the borrower's suitability for a loan.

LOAN APPLICATION FEE:
The charge paid by the borrower for the honor of requesting a loan and of having the lender consider the request.

LOAN COMMITMENT:
See "commitment."

LOCK OR LOCK IN:
Obtain a commitment from a lender to guarantee a certain interest rate or other loan feature for a set period of time.

LOCK PERIOD:
The time span over which the lender guarantees a feature of a loan.

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MANDATORY DELIVERY COMMITMENT:
A lender's written promise to deliver certain funds at specified dates upon terms set out in the commitment.

MARGIN:
The difference or the added amount. In mortgages, the difference between the index interest rate and the interest rate charged on the variable or adjustable rate mortgage. Expressed in the contract as a percentage (i.e. "prime plus three per cent").

MATURITY DATE:
The date upon which a mortgage loan comes due and payable.

MILITARY CLAUSE: A term of a residential lease which allows a tenant who is a member of the military to terminate the lease upon being transferred to another place without suffering any penalty.

MINIMUM DOWN PAYMENT:
The least amount of money a purchaser can provide toward the purchase price of a house under a mortgage loan program.

MINIMUM PAYMENT:
The lowest amount a borrower is allowed to pay toward a loan, line of credit or other debt in a given period of time.

MONTHLY DEBT SERVICE:
The periodic payments required to remain current on all outstanding loans.

MONTHLY FIXED INSTALLMENT:
Periodic payment that is applied toward accumulated interest and reduction of principal.

MONTHLY HOUSING EXPENSE:
The total of the costs of maintaining a home per month, including financing, realty taxes and house insurance.

MONTHLY TOTAL EXPENSES:
The total when monthly housing expense is added to monthly debt service.

MORTGAGE:
A loan which is secured against property (i.e. registered on title as a claim or encumbrance on the property). Often used to purchase the property itself.

MORTGAGE BACK:
Also known as a "vendor take-back mortgage." Financing of a purchase of property whereby the vendor accepts only a portion of the purchase price up front and accepts a mortgage (with periodic payments and interest chargeable) for the remainder.

MORTGAGE BANKER:
A firm that offers mortgages for property purchases but, at times, may require financial support from larger institutions to help cover the outlay of cash.

MORTGAGE BROKER:
A middleman who serves to bring borrowers together with lenders. Offers the service of doing the shopping for the borrower while often collecting a fee from the chosen lender rather than from the borrower.

MORTGAGE COMMITMENT:
See "commitment."

MORTGAGE CORRESPONDENT:
An authorized agent of a lender for a geographic area.

MORTGAGE DISABILITY INSURANCE:
A policy of insurance which promises to pay periodic mortgage payments for the borrower during any future period that borrower may be disabled from working and, therefore, incapable of making the payments himself.

MORTGAGE INSURANCE:
A policy of insurance which promises to pay out the amount owing in the event that the borrower defaults.

MORTGAGE LIFE INSURANCE:
A policy of insurance which promises to pay out the remaining balance owing on a mortgage should the borrower die. The amount payable by the insurer declines as the mortgage is paid down and the policy ends upon the paying out of the mortgage.

MORTGAGE LOAN SERVICING:
The lender's actions in collecting mortgage payments, allocating payments to principal, interest and escrow accounts, paying out property taxes and insurance over the life of the loan.

MORTGAGE LOAN UNDERWRITING:
The action of reviewing an application for a loan and then advising the lender as to the risk factor in making the loan.

MORTGAGE PROGRAM:
The bundle of features of a particular kind of mortgage offered to the public.

MORTGAGE VALUE:
The estimate worth of a particular asset which is established for the purposes of obtaining financing secured against that asset.

MORTGAGEE:
The lender in a mortgage transaction. Also known as chargee.

MORTGAGEE IN POSSESSION:
A lender that has taken over control and occupancy of a property upon default of the borrower to collect income from the property and prepare for foreclosure and sale.

MORTGAGOR:
The borrower, purchaser or homeowner in a mortgage transaction. Also known as "chargor."

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NEGATIVE AMORTIZATION:
When the periodic payments on a loan are not sufficient to pay the interest which has accumulated during the previous period resulting in an increase rather than a decrease in the amount owing on the mortgage.

NEGATIVE AMORTIZATION CAP:
A limit, expressed as a percentage of the principal, of the negative amortization allowed under a variable or adjustable rate mortgage.

NEGOTIABLE RATE MORTGAGE:
See adjustable rate mortgage or variable rate mortgage.

NO BID:
Where the VA chooses not to acquire a property in foreclosure upon default but instead to pay out on the amount it has guaranteed of the mortgage (generally 60% of the principal).

NO CASH-OUT REFINANCE:
The replacement of a matured loan with a new loan where no additional principal is borrowed and added to the loan.

NO CHANGE SCENARIO:
A method of calculating the future payments required under a variable or adjustable rate mortgage on the assumption that the index (and therefore the interest chargeable on the mortgage) will not change.

NOMINAL LOAN RATE:
The interest rate stated on the loan agreement.

NON-ASSUMPTION CLAUSE:
A term of a mortgage contract that forbids the transfer of the mortgage to a new owner without prior consent of the lender.

NON-CONFORMING LOAN/MORTGAGE:
A mortgage or loan that is not eligible for Fannie Mae (FNMA) or Freddie Mac (FHLMC) programs.

NONDISTURBANCE CLAUSE:
A term of a mortgage which guarantees that leases regarding the subject property will be allowed to continue uninterrupted in the event of mortgage default.

NOTE:
A written instrument of indebtedness, promising to pay a certain person a particular sum of money upon stated terms.

NOTE RATE:
The interest rate as set out in the mortgage/loan contract.

NOTICE OF DEFAULT:
The written notice sent by a lender to a borrower stating that the borrower has not met his obligations under the loan contract and the lender may take legal action to enforce the agreement.

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OBLIGEE:
The lender in a loan transaction -- the person to whom, as a result of her actions, another person owes an obligation. See also "mortgagee."

OBLIGOR:
The borrower in a loan transaction -- the person who owes an obligation to another.

OPEN END MORTGAGE:
A loan which is specifically drafted to allow the borrower to borrow further funds at a later date without requiring the preparation and registration of new mortgage documentation.

OPEN MORTGAGE:
A mortgage which may be prepaid in full or in part at any time during that life of the mortgage without notice, bonus or penalty.

OPTION RISK:
The downside of giving a borrower an option, such as the possibility that she may prepay an open mortgage and reduce the income generated to the lender by the accumulation of interest over the life of the mortgage.

ORIGINAL EQUITY:
The owner's original down payment on a property.

ORIGINAL FACE VALUE:
The principal amount owed on a mortgage on the date of its negotiation as shown on the "face" of the agreement.

ORIGINAL PRINCIPAL BALANCE:
See "original face value."

ORIGINATION FEE:
See "commitment fee."

OUTSTANDING BALANCE:
The amount of money (including principal and interest) owing at a given date on a loan or mortgage.

OWNER FINANCING:
See "mortgage back" or "vendor take-back mortgage."

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PACKAGE MORTGAGE:
A Loan secured against both land and chattels.

PAPER:
Slang term for a loan note given instead of a cash payment.

PARTIAL PAYMENT:
Any payment which is insufficient to meet the full amount required.

PARTIAL RELEASE:
A document signed by the mortgagees holding a blanket mortgage registered on title to several properties which removes the mortgage from title to just one of the properties.

PARTIALLY AMORTIZED MORTGAGE:
A very common form of mortgage in which the term is less than the amortization period such that, at the maturity date, the mortgage is not fully paid out and either refinancing or a large balloon payment is required.

PARTICIPATION (OR PARTICIPATING) MORTGAGE:
A mortgage in which the lender is entitled to a stated share of the income of the property or of sale proceeds.

PAY OUT:
To provide the lender with the total amount then required to retire a loan obligation.

PAYMENT ADJUSTMENT INTERVAL:
The period of time between changes in the amount of each periodic payment on a variable or adjustable rate mortgage.

PAYMENT CAP: A term of some variable or adjustable rate mortgages in which the level to which the monthly payment may rise is limited to a certain dollar figure.

PAYMENT CHANGE DATE:
The date when the amount of each payment under an adjustable, variable or graduated payment mortgage changes.

PAYMENT DECREASE CAP:
A contractual limit on the amount of each periodic payment may drop at any one payment change date. Expressed as a percentage.

PAYMENT INCREASE CAP:
A contractual limit on the amount of each periodic payment may rise at any one payment change date. Expressed as a percentage.

PAYMENT PENALTY:
Also known as "prepayment penalty" or "early payment penalty," the fee paid by a borrower when she pays out some or all of the principal of a loan at a time when such a payment is not allowed under the terms of the loan.

PENALTY:
Fine for breaching a rule, term of a contract or law.

PERIODIC PAYMENT CAP:
See "payment cap."

PERIODIC RATE CAP:
See "rate cap."

PERMANENT LOAN/MORTGAGE:
A long-term mortgage, often registered after construction is complete and the property is occupied. Also known as "end loan."

POINT:
Equal to 1% of the principal of a mortgage, a charge levied on the borrower by the lender for originating the mortgage as prepaid interest. Also known as "loan discount points."

PRE-APPROVED MORTGAGE:
A commitment from a lender to provide a mortgage loan on stated terms to a borrower before the borrower has found a property to buy. The pre-approved mortgage allows the borrower to make a firm, cash offer on the property of choice.

PREARRANGED REFINANCING AGREEMENT:
An arrangement between lender and borrower in which the lender agrees to favorable terms for the borrower on a future re-finance as an inducement to the borrower to place the original mortgage with the lender.

PRE-FORECLOSURE SALE:
The sale of a property by a delinquent borrower under an agreement with the lender. The sale may not produce enough proceeds to pay out the loan but the lender will save the costs of foreclosing and selling.

PREMIUM:
1. The periodic payment on a policy of insurance.
2. The value of a debt instrument in excess of it face value.
3. Of highest quality.

PREPAID EXPENSES:
Payments made on account of costs and disbursements that are not yet incurred, may be placed in an escrow account.

PREPAID INTEREST:
Charges for interest that are paid in advance of their accrual (i.e. point charges, etc.).

PREPAYMENT:
Payment of all or part of the principal of a mortgage or loan before it comes due.

PREPAYMENT CLAUSE:
A term in a mortgage that establishes the rules regarding extra payments toward principal.

PREPAYMENT PENALTY:
A fee charged to a borrower for paying out all or part of the principal of the mortgage or loan before it comes due.

PREPAYMENT PRIVILEGE:
The right of the borrower to pay out all or part of the outstanding principal before it comes due.

PRE-QUALIFICATION:
The act of going through the mortgage application process before the borrower is ready to borrow, to establish how much money the borrower could obtain under a loan.

PRICE-LEVEL-ADJUSTED MORTGAGE:
A an adjustable or variable payment loan which uses the rate of inflation as an index.

PRIME RATE:
The best rate charged on loans, usually saved for the best clients of the lenders. May also be set by a national institution as a benchmark or index for other lenders.

PRINCIPAL:
1. The amount of money borrowed or still owed on a loan, without including interest.
2. The person on whose behalf an agent acts.

PRINCIPAL AND INTEREST PAYMENT (P&I):
A blended, periodic payment that is enough to pay off accumulated interest and a portion of the principal.

PRINCIPAL BALANCE:
The outstanding amount owing on a mortgage without including accumulated interest.

PRINCIPAL BROKER:
The head of a real estate brokerage, licensed as a broker, who is responsible for all transactions run through the firm.

PRINCIPAL, INTEREST, TAXES AND INSURANCE (PITI):
The four parts of many periodic loan payments.

PRIVATE MORTGAGE INSURANCE (PMI):
A policy of insurance issued by a non-governmental entity which protects a lender against the default of the borrower.

PROGRESS PAYMENTS:
Loan advances issued to a builder as construction of a building moves forward.

PROMISSORY NOTE:
A document signifying an indebtedness.

PURCHASE MONEY MORTGAGE (PMM):
See "mortgage back." A loan from the vendor to the purchaser to help finance the purchase of the property.

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QUALIFICATION RATE:
The rate of interest used to calculate whether or not a borrower qualifies for a mortgage.

QUALIFICATION REQUIREMENTS:
Those guidelines set by lenders to be used when deciding whether or not an applicant will be given a loan.

QUALIFIED ACCEPTANCE:
Also known as "conditional acceptance." Agreeing to enter a contract provided certain conditions are met.

QUALIFIED BUYER:
A purchaser who has been pre-approved for financing.

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RATE CAP:
A limit of how much an interest rate can change in a variable of adjustable rate mortgage either in a given period or over the life of the loan.

RATE COMMITMENT:
A written promise by a lender to lend money to a borrower at a stated rate of interest -- usually time limited.

RATE LOCK-IN:
See "rate commitment." A written agreement in which the lender guarantees the borrower a specified interest rate, provided the loan closes within a set period of time.

RECAST PAYMENT:
Adjustment of the periodic payment on an adjustable or variable rate mortgage to ensure that the mortgage will be paid out by maturity date.

RECASTING:
Adjusting the terms of a loan agreement in light of new developments (i.e. lower rates, possible default).

RECOURSE:
The right of a lender to pursue a borrower personally for moneys owed.

REDEEM:
To bring mortgage payments up-to-date after the lender has begun default proceedings. Once a borrower (or other lien holder) redeems, the mortgage is back in good standing and the relationship continues as before the default.

REDEMPTION PERIOD:
The length of time during which the borrower may redeem a mortgage.

REDUCTION CERTIFICATE:
A mortgage statement setting out the amount owing on the loan as of a given date. May be used for discharges or assumptions.

REFINANCE:
To replace an existing and perhaps mature mortgage with a new mortgage on the same property. New mortgage may have different terms than the old one.

RELEASE CLAUSE:
A term of a mortgage which allows the borrower to pay out the loan and have the mortgage removed from title.

RENEWAL OPTION:
A right which arises out of a term in a contract and takes effect at or near the termination date of a contract; the party who enjoys the right may choose to continue the agreement on terms as set out in the option clause or to treat the contract as at an end upon the termination date.

REPAYMENT PLAN:
A schedule arranged between a lender and borrower to set out how a debt is to be paid out.

REQUIRED CASH:
Collective term for the total sum of money required to complete a transaction, including purchase price, taxes, legal fees, mortgage fees, etc.

RESCISSION:
The act of treating a contract as being at an end as a result of the failure, breach or misconduct of another party.

RESERVE PRICE:
The amount set prior to an auction which must be met in the bidding for a particular item before the item will be sold. Also known as "reserve bid."

RETIRE (A DEBT):
To fulfill one's obligations under a loan or mortgage so that the lender has no further claims against the borrower.

REVERSE ANNUITY MORTGAGE (RAM):
A type of mortgage where the equity in the home serves as security for periodic payments made by the lender to the borrower. Mortgage is generally paid out upon the sale of the property.

ROLLOVER LOAN:
A loan where the amortization period is much longer than the term and the borrower is allowed to refinance at the end of the term at the interest rate then applicable.

RULE OF 72'S:
To calculate the number of years it will take to double money while earning compound interest, divide the interest rate into 72. Money invested at 10 percent compound interest will take 7.2 years to double.

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SAVINGS AND LOAN ASSOCIATION (S&L):
Another form of mortgage lender.

SAVINGS ASSOCIATION INSURANCE FUND (SAIF):
The Federal Deposit Insurance Corporation (FDIC) insurance fund for deposits in savings and loan associations.

SCHEDULED MORTGAGE PAYMENT:
The periodic payment the borrower is obliged to pay on a loan.

SEASONED MORTGAGE:
An old loan under which the borrower has proven herself capable of meeting loan obligations.

SECOND MORTGAGE:
A mortgage loan which is registered on title after another mortgage (the first mortgage) and, therefore, is behind the first mortgage in priority. In the event of default and sale of the property, the second mortgagee will only be paid if there are funds left after the payment of the first mortgagee.

SECONDARY FINANCING:
Another term for a second mortgage; a loan which stands behind the principal loan.

SECONDARY MARKET:
The purchase and sale of mortgages among lenders.

SECURITY:
An asset held as a guarantee of payment of a loan.

SECURITY INTEREST:
Legal term for the claim the lender has against the borrower's property which has been pledged under a loan.

SELF-AMORTIZING MORTGAGE LOAN:
A loan which till be paid off by the end of its term, such that its term equals its amortization period.

SELLER FINANCING:
Also known as "vendor take-back mortgage" or "mortgage back," where the seller of a property agrees to payment of part of the purchase price over time with the debt to the seller registered on title as a mortgage.

SELLER-TAKE-BACK:
See "seller financing."

SERIOUS DELINQUENCY:
The condition of being far behind in mortgage payments such that mortgage enforcement by the lender is imminent.

SERVICING (THE LOAN):
The act of collecting periodic payments toward a debt.

SERVICING FEE:
The fee charged to the borrower for the lender's costs of collecting payments and administering a loan.

SETTLEMENT BOOK:
An information pamphlet given by lender to borrower which explains the process of the loan, settlement of the loan, etc.

SETTLEMENT COSTS:
See "closing costs."

SETTLEMENT SHEET:
The information sheet which sets out the allocation of funds on closing.

SHARED APPRECIATION MORTGAGE (SAM):
A loan arrangement which allows the lender to share, in exchange for a reduced interest rate, in any gain in the value of the property against which the mortgage is secured.

SIMPLE INTEREST:
A charge for the use of money which is calculated on a periodic basis as a percentage of the principal borrowed. No further interest is charged on interest accumulated in earlier periods.

SPREADING AGREEMENT:
A contract in which the borrower gives the lender additional security for a loan by allowing it to be lodged against other property owned by the borrower.

STANDARD MORTGAGE:
A mortgage which has equal periodic payments and is paid out at the end of its term.

SUBJECT TO MORTGAGE:
A term of an agreement which states that the purchaser will assume an existing mortgage registered on title to the property.

SUBMORTGAGE:
Where a mortgage is pledged as security for a loan to the mortgagee (the original lender).

SUBORDINATE FINANCING:
See "secondary financing."

SUBORDINATION:
Placing the right of one person behind those of another.

SUBORDINATION CLAUSE:
An agreement by the lender which allows the current mortgage to be "postponed" or placed behind a later mortgage in priority.

SUBSTITUTE OF TRUSTEE:
An instrument registering a change of trustee under a deed of trust.

SURPLUS FUNDS:
Money gained in a mortgage enforcement sale of property which is in excess of the money required to satisfy the mortgage, interest, penalties, and costs.

SWING LOAN:
A short-term loan designed to bridge the borrower's finances between two events. For example, a person who buys a new home in April but cannot sell her old home until June may require a swing loan to carry both homes for the interim period until the old home may be sold and the proceeds used to pay out the swing loan. Also known as "bridge financing."

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TANDEM PLAN:
A joint program of the Government National Mortgage Association (GNMA) and the Federal National Mortgage Association (FNMA) to provide low-interest home loans.

TEASER RATE:
A lower interest rate charged on an adjustable or variable rate mortgage for a brief, introductory period as an inducement to the borrower to accept the loan from the lender.

TERM LOAN:
A loan that comes due on a given date, often before the periodic payments would pay the loan out.

TERM, AMORTIZATION:
Term: The period of time during which the loan contract is active, during which the borrower makes periodic payments to the lender and at the end of which the balance of the loan becomes due and payable.
Amortization: The period of time after which, if all periodic payments are made on time and in full, the loan will be paid out. Term may not be the same as amortization: a normal mortgage may be amortized over 25 years with just a five year term at which time the borrower has to re-finance.

TERMS:
The various clauses that make up a contract. Sometimes used to described the financial portions of the contract only.

TITLE THEORY STATES:
Jurisdictions in which ownership of land is divided into two interests: legal title and equitable title. When an owner registers a mortgage in favor of a lender, legal title is transferred to the lender while the owner retains equitable (or beneficial) title. Once the mortgage is paid out, legal title is transferred back to the owner.

TOTAL DEBT RATIO:
Comparison of the total costs of living for a person (including debt, food, utilities) over a given period with the gross income of that person.

TOTAL INTEREST PAYMENTS:
A calculation of all interest paid on a loan over its life.

TRANSACTION FEE:
A charge for making a withdrawal on a line of credit or other bank account.

TRUST DEED:
An instrument of conveyance of title to property wherein the transferee will be holding the title to the property on behalf of another person.

TRUSTEE:
A person who holds title to property on behalf of another (a "beneficiary of the trust").

TRUSTEE'S SALE:
Sale conducted by a trustee (often the lender) under the terms of the deed of trust.

TRUTH-IN-LENDING ACT: A federal law which requires lenders to disclose all terms of a loan arrangement to the borrower in a specified form.

TWO-STEP MORTGAGE:
A mortgage contract in which the interest rate changes after a given period of time, such that the rate charged is lower for the first part of the term of the mortgage and then market rate or higher later in the term.

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UNDERWRITER:
A person who reviews and evaluates an application for a loan or insurance policy.

UNDERWRITING:
The decision as to whether or not to accept a loan or insurance application.

UNSECURED LOAN:
A loan in air, with no asset pledged as collateral or security for it.

UPSET PRICE:
An amount set by the court which creates the reserve bid for an auction of property; the property may not be sold for less than the upset price.

USURY:
The illegal act of charging extremely high interest rates on a loan.

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VA:
See Department of Veteran's Affairs and related entries.

VA LOAN:
A loan on below market terms guaranteed by the Department of Veterans Affairs, given to former members of the armed forces.

VARIABLE INTEREST RATE:
An interest rate that may change according to change in the index rate. See "adjustable interest rate."

VARIABLE-MATURITY MORTGAGE:
A long-term loan in which the date the balance is due may be changed to adjust the level of periodic payments.

VARIABLE RATE MORTGAGE (VRM):
See "adjustable rate mortgage."

VENDOR TAKE-BACK MORTGAGE:
See "mortgage back."

VERIFICATION OF DEPOSIT (VOD):
A certification of the status of a borrower's bank accounts.

VERIFICATION OF EMPLOYMENT (VOE):
A certification of the employment status of a borrower, signed by the borrower's employer.

VOLUNTARY LIEN:
A claim that is recorded/registered with consent of the owner.

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WAIVE ESCROWS:
The act of the lender in allowing the borrower to retain responsibility for paying taxes and insurance.

WAREHOUSE FEE:
Charge to a borrower to cover the costs of the lender taking short term loans from other lenders to cover the borrower's mortgage.

WAREHOUSING:
The process of assembling mortgages for sale to the secondary mortgage market.

WEEKLY PAYMENTS:
An alternative to the more traditional monthly payments on a loan or mortgage. Results in faster pay-down of principal, lower total interest paid.

WIRE TRANSFER:
The movement of funds from one place to another electronically.

WRAPAROUND MORTGAGE:
A secondary financing option in which new money borrowed is blended with money already owed and registered on title to the property. A second mortgage is registered as security for the new money but the old mortgage remains in existence and the rate of interest is a blend of the rate chargeable on the old mortgage and the rate chargeable on the newly borrowed money.

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