Glossary of Real Estate & Financing Terms
A loan which is paid off in equal installments during its
ADJUSTABLE RATE MORTGAGE: A loan that allows the
lender to adjust the borrower's interest rate and payments
at prescribed times and sometimes with prescribed limits.
Lower interest rates are customary.
APPRAISAL: An estimate of real estate value, usually
issued to the standards of FHA, VA, FNMA. Recent comparable
sales in the neighborhood are the most important factor in
ASSUMABLE MORTGAGE: Purchaser takes ownership to real
estate encumbered by an existing mortgage and assumes
responsibility as the guarantor for the unpaid balance of
CAPITAL GAINS TAX: The taxable profit derived from
the sale of a capital asset. The capital gain is the
difference between the sale price and the basis of the
property, after making appropriate adjustments for closing
costs, fixing up expenses, capital I improvements, allowable
CLOSING COSTS: Expenses incurred in the closing of a
real estate or mortgage transaction. Purchaser's expenses
normally include: cost of title examination, premiums for
title policies, survey, attorney fee, lender's service fees,
and recording charges. In addition, the purchaser may have
to place in escrow a sum of money to cover accrued real
estate taxes and insurance.
CONVENTIONAL MORTGAGE: A loan neither insured by the
FHA nor guaranteed by the VA.
EQUITY: The difference between the market value of
property and the homeowner's indebtedness (mortgage).
EXCHANGE: The trading of an equity in a piece of
property for the equity in another.
FIXED RATE MORTGAGE: A loan that fixes the interest
rate at a prescribed rate for the duration of the loan.
FREDDIE MAC: Nickname for Federal Home Loan Mortgage
Corporation (FHLMC), a federally controlled and operated
corporation to support the secondary mortgage market. It
purchases and sells residential conventional home mortgages.
FANNIE MAE: Nickname for Federal National Mortgage
Association (FNMA), a tax paying corporation created by
Congress to support the secondary mortgages insured by FHA
or guaranteed by VA, as well as conventional home mortgages.
GRADUATED PAYMENT MORTGAGE: An FHA, VA, or
Conventionalloan where the borrower pays a portion of the
interest due each month during the first few years, of the
loan. The payment increases gradually during the first few
years to the amount necessary to fully amortize the loan
during its life.
IMPOUND ACCOUNT/ESCROW PAYMENT: That portion of a
mortgagor's monthly payment held in trust by the lender to
pay for taxes, hazard insurance, mortgage insurance, lease
payments, and other items as they become due, known as
impounds in some states.
INVESTOR: The holder of a mortgage or the permanent
lender for whom the mortgage banker services the loan. Any
person or institution that invests in mortgages.
LEASE PURCHASE AGREEMENT: Buyer makes a deposit for
the future purchase of a property with the right to lease
the property in the interim.
LOAN TO VALUE RATIO: The ratio of the mortgage loan
principal (amount borrowed) to the property's appraised
value (selling price). On a $100,000 home, with a mortgage
loan principal of $80,000, the loan to value ratio is 80%.
MORTGAGE/DEED OF TRUST: Pledge of real property to
secure a debt by a written instrument given by the
mortgagor. Should be recorded in the County Recorder's
MORTGAGE INSURANCE PREMIUM (MIP): The consideration
paid by a mortgagor for mortgage insurance either to FHA or
a private mortgage insurance (PMI) company. This insurance
protects the investor from possible loss in the event of a
borrower's default on a loan.
MORTGAGEE: The lender of money or the receiver of the
MORTGAGOR: The borrower of money or the giver of the
NOTE: A written promise to pay a certain amount of
ORIGINATION FEE: A fee or charge for work involved in
the evaluation, preparation, and submission of a proposed
POINT: One percent of loan amount.
PREPAYMENT PENALTY: A fee paid to the mortgagee for
paying the mortgage before it becomes due. Also known as
prepayment fee or reinvestment fee.
PREPAYMENT PRIVILEGE: The right given to a purchaser
to pay all or part of a debt prior to its maturity. The
mortgagee cannot be compelled to accept any payment other
than those originally agreed to.
PRIVATE MORTGAGE INSURANCE (PMI): Insurance written
by a private company protecting the mortgage lender against
loss occasioned by a mortgage default.
RENT WITH OPTION: A contract which gives one the
right to lease property at a certain sum with the option to
purchase at a future date.
SECOND MORTGAGE/SECOND TRUST: Junior Mortgage or
Junior Lien; an additional loan imposed on property with a
first mortgage. Generally at a higher interest rate and
shorter terms than a "first" mortgage.
STRAIGHT LOAN: A loan with periodic payments of
interest only: the principal sum due in one lump sum upon
TITLE: Often used interchangeably with the word
ownership. It indicates the accumulation of all rights in
property; the owners and others.
TITLE INSURANCE: An insurance policy which protects
the insured (purchaser or lender) against loss arising from
defects in title.
Copyright © 2012 SWFHomesAndLand.com
SWF Homes and Land website of Southwest Florida real estate
resources features listings of real estate, homes and land for sale
in Bonita Springs, Bonita Beach, Captiva Island, Estero, Ft. Myers, Fort
Myers Beach, Naples, Sanibel Island, Cape Coral, Lehigh Acres,
Vanderbilt Beach, Marco Island, Sanibel, Lee County, Collier County,
and all of South West Florida with local info & links, free reports, resources for
buyers and sellers as well as investment and relocation information
Site designed and maintained by: