A Simple Glossary of Mortgage Terms

Adjustable Rate Mortgage (ARM) - A mortgage where the interest rate is not fixed, but changes during the life of the loan in line with movements in an index rate.

Agent - Agent The person who is acting on behalf of the principal or client.

Amortization - The reduction of a debt by regular, usually monthly, instalments of principal and interest.

Application - The method by which a mortgage is applied for. The initial statement of personal and financial information which is required to approve your loan.

Application Fee - A Fee that is paid upon mortgage application.

Appraisal Fee - A fee charged by an appraiser to render an opinion of market value as of a specific date.

Appraised Value - An estimate of the market value of the home and property that the borrower pledges as security for the mortgage.

Assessed Value - A value determined by your local tax assessor and used to determine your property tax obligations.

Assets - The things of value that you own, such as your home, car or summer home.

Borrower - A person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan terms.

Bridge Loan - A short term loan meant to bridge a financing gap, such as when you may be selling your home and need to access the available equity in that home before the sale closes.

Broker - The person who brings both borrower and Lender parties together and assists in negotiating contracts between them.

Cap - The maximum allowable increase, for either payment or interest rate, for a specified amount of time on an adjustable rate mortgage.

Credit Report - A report outlining an individuals credit history, public records and credit worthiness. A history of an individuals ability to pay their bills on time as well as any other relevant public records.

Default - The failure of a borrower to comply with the terms of a mortgage. Deposit - A sum of cash that must be paid to the vendor by the purchaser.

Equity - The difference between the fair market value (appraised value) of your home and your outstanding mortgage balance.

Fixed Rate Mortgage - A mortgage loan with an interest rate that does not change during the entire loan term.

Foreclosure - The legal process by which property that is mortgaged as security for a loan may be sold to pay a defaulting borrower's loan.

Interest Rate - A charge for a loan usually a percentage of the amount loaned.

Lender - An individual or company that offers to lend money for an agreed period of time.

Loan - Money borrowed that is usually repaid with interest.

Loan To Value (LTV) - A ratio determined by dividing the sales price or appraised value into the loan amount, expressed as a percentage.

Mortgage - A legal document that pledges property to a lender as security for the repayment of the loan.

Principal - The amount of the loan on which interest is calculated.

Rate (Interest) - The annual percentage amount charged in return for borrowing funds.

Refinance or Refinancing - When an existing mortgage is replaced by a new mortgage.

Security - Property, or assets, offered as collateral for a loan.

 

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