All The Frequently-Used Mortgage Terms You Need To Know
Mortgage loans are a big source of funds for millions of Americans and many housing dreams are given shape because of these loans. However, the process of getting mortgage loans is not easy and there are quite a few complex situations that need to be overcome.
In this article we will try and have a look at the various terms that are commonly used as far as mortgages are concerned.
The list is quite big and it might not be possible to list down everything and hence getting the full answer to the terms all the frequently-used mortgage terms you need to know may not be fully possible.
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Adjustable Rate Mortgage (ARM):
This is a term which refers to interest rates that are not fixed but keep changing based on changes to standard financial index. In most cases there are stipulations as to the maximum points by which this can increase. There are some basic differences between fixed rate mortgages and ARM which has to be understood.
Appraisal:
This is a confidential and written report by a qualified appraiser. The main objective of this is to estimate the fair value of the properly. This is very important because it plays a big role in deciding the loan amount, interest and other factors.
Balloon Mortgage:
This is a term that describes about the facility which offers a loan with lower monthly installment for a particular period of time. This could range anything between 3 years to 10 years. Once the agreed period has expired the borrower is obligated to pay the remaining balance in one installment.
Balloon Payment:
This is a single lump sum payment that is usually bigger than the regular and periodic payment. It usually gets adjusted against the principle that is due from the borrower.
Collateral:
This term is about the properly that is pledged as security against which the loan is given. Should the borrower fail in his obligation to repay the loan, the lender could take ownership of the property and sell the same and recover the dues payable to him.
Down Payment:
This is about the money that is paid by the purchaser and is about the portion that is not financed by a mortgage loan. The down payment would vary from financier to financier but would be within the range of 5 to 20 percent of the sale price. There are some lenders who also offer zero down payment options.
The above are all the frequently-used mortgage terms you need to know.