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Mortgage is a legal agreement that is used to collateralize a loan with a lien against real property. The mortgage agreement is a contract between a borrower and a lender. Because of the mortgage agreement used to secure the loan, in the event that a borrower stops making the payments agreed to in the loan agreement a lender is able to then foreclose on the mortgage and take the real property back and sell it to satisfy the loan.
This is when a borrower takes out a new mortgage secured loan to payoff existing mortgage loan debt owed on a home. Quite often borrowers will to a mortgage refinance to consolidate debt, take out cash to make an investment or to payoff existing mortgage loan balances to lower the existing interest rate on the loan which lowers the monthly loan payment on the home.
This is an owners financial dollar amount difference between what a home is worth and what is owed on the home. For instance, when the home is worth $100,000 and the borrower owes $50,000 then the equity interest in the property is $50,000.
Home Equity Loan
This is a mortgage loan where the borrower uses the equity in their home, which is the difference between what the home is worth and what is owed on it, to secure a loan. Normally a lender will only lend a reduced percentage of the homes value minus what the borrower owes. For example a lender’s guideline for a home equity loan’s loan to value may be 80% of the home’s value minus the existing 1st mortgage balance. The money funded from a home equity loan is used to payoff debt, fund vacations, fund a retirement fund as well as a variety of other reasons.
Home Equity Line of Credit (aka – HELOC)
This loan is line of credit secured by Home Equity Mortgage Loan Agreement. Interest is paid by the borrower on the balance outstanding. A HELOC loan product gives borrowers the ability to take a cash advance against their property a little or as large amount out they want at any time up to the amount of available credit.
This loan is a mortgage agreement that is recorded after the borrowers first mortgage to secure a loan. The lender is willing to take the risk of being 2nd in line behind the borrowers 1st mortgage lender on the home equity of the property. Second mortgage loan agreements are almost always at higher rates than the existing first mortgage that is on the property.
This is a home mortgage loan product where a borrower, be it an existing homeowner or home buyer, is taking out a loan that does not have monthly mortgage payments. Depending on the borrowers age the loan to value percentage is as low as 59% of the value of the home. When interest on the loan accumulates and then comes due when the owner dies or sells the property. The borrower is required to pay for a homeowners insurance police and the property taxes due on the home each year.
This is an organization that is a financial institution that funds mortgage secured loans with longer amortization periods, from 10 years all they way to 30 years, to homeowners. Each month the borrowers that take out mortgage loans with the mortgage lender that funder their loan make monthly payments, which normally included interest, principal and sometimes monthly escrow payments for property taxes and homeowners insurance.
This is the amount of money a borrower takes out from a lender’s mortgage secured loan.
Annual Percentage Rate (aka – APR)
This is the effective rate of interest on a loan which also factors in the origination fees and other loan fees that effect the annual percentage rate.
Fixed Rate Mortgage
This is a mortgage loan with an interest rate that is locked in and will never change. The monthly payment for this loan’s principal and interest does not change for the life of the loan.
Adjustable Rate Mortgage
This mortgage loan is a financial product with an interest rate that can and often does change. When it changes is dictated by the terms written in the loan agreement and the changes are often tied to a specific financial indicator in the lending markets. If the financial indicator goes up then the interest rate and payment on mortgages tied to it will go up.
This mortgage secured loan product is one where the borrower is required to pay the interest accruing on the loan, but is not required to pay on the principal. Normally this loan product has a fixed period of time and then a borrower is required to pay the loan off or start paying both principal and interest payments.
This mortgage loan is one that requires monthly payments which include principle and interest and it is paid off over time with a fixed payoff date.
Calculation of Loan-to-Value Ratio (aka – LTV)
This loan amount is determine by a dividing the current value of a home into the current balance of the mortgage loans owed against the property.
Lender Mortgage Loan Fees
Most mortgage loans have fees and these can be anywhere from less than 1% of the loan amount all the way to 5 percent. The fees includes items like origination fees, appraisal cost, loan document preparation fee and loan application.
Truth in Lending Act
This act is a federal law that was put into place as a section of Consumer Protection Act. This law mandates that all lenders disclose all the fees connected to each and every mortgage loan transaction and disclose all the information connected to the loan.
Do Mortgage Loan Guidelines Require Set Down Payment
Conventional loan lending written guidelines call for a down payment of at least 5% all the way to 41% for a reverse mortgage for someone that is 62 years old. There may be little or zero-down payment programs available for eligible United States military veterans.
Mortgage Loan Interest Rate Lock (aka – rate lock)
This is the actual transaction between a lender and a borrower where the borrower, with the help of it’s mortgage broker or mortgage banker, submits a rate lock form to the lender for a specific interest rate on their loan. A rate lock locks in the interest rate for that borrowers mortgage loan for a specific period of time like 30 days, 60 days or 45 days. If the mortgage loan the borrower is applying for does not close and fund the loan by the final date of the rate lock that lock is expired and gone forever.
Locking a Loan Rate Versus Floating
Locking an interest rate with a lender on a mortgage loan gives the borrower and its lender a set expiration date for the loan to close at the locked rate and just as important, a locked in interest rate. Floating an interest rate is done my simply enough not submitting a lock request to a lender and allowing the rate on the mortgage to go unlocked or “float”. If rates go down after a rate is locked by a borrower then there is no unlocking the rate and getting a better rate. If rates go up and borrower did not lock their interest rate in then the borrower is subject to whatever rates are in the market at that point.
Private Mortgage Insurance (aka – PMI)
This is insurance coverage that is mandated by a lender when a borrower’s equity position in a home is lower than 20% or the borrower is putting down less than 20% when they are buying a home. This insurance gives coverage to a mortgage lender on the portion of the loan that is above 80% of the mortgage loan amount.
Pre-Qualified Versus Pre-Approval
When a borrower is pre-qualified this gives them knowledge that from an assessment from their loan officer or mortgage broker that they qualify to borrower potentially up to a certain loan limit. This is done by looking at the borrowers income, monthly bills and the amount of money that is saved up by them to put down on a property. When a borrower is given a pre-approval it gives them a set loan amount that they can borrower to buy a home.