Mortgage Terms : A glossary of terms used by the mortgage industry

Acceleration clause : A clause in the mortgage deed that allows the mortgagee to demand payment of the outstanding loan balance under certain circumstances such as where the mortgager has transferred title to another individual without informing the lender.

Amortization : A scheme of repayment where the money paid consists of two portions, one toward the interest and the other toward part of the principal.

Appraised value : An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property.

Appreciation : The increase in the value of a property due to changes in market conditions, inflation, or other causes.

Asset : Items of value owned by an individual. Assets that can be either ‘liquid’—those that can quickly be converted into cash (bank accounts, stocks, bonds, mutual funds), or non liquid such as real estate, personal property, etc.

Bi-weekly mortgage : A mortgage in which you make payments every two weeks instead of once a month.

Clear title : A title that is free of liens or legal doubts as to ownership of the property

Closing : The time at which, after borrower’s right to rescind has ceased, loan document is signed. After closing, funds are disbursed to the debtor and a lien against his property is placed in favor of the creditor.

Collateral : In a home loan, the property is the collateral. The borrower risks losing the property if the loan is not repaid according to the terms of the mortgage.

Credit : An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.

Creditor : A person to whom money is owed.

Debt : An amount owed to another.

Down Payment : Cash equaling a small percent of the full price of a property that the buyer pays to the seller so as to get loan for the balance amount.

Fair market value : The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.

First mortgage : The mortgage that is in first place among any loans recorded against a property.

Foreclosure : The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property.

Lien : A legal claim against a property that must be paid off when the property is sold. A mortgage or first trust deed is considered a lien.

Loan : A sum of borrowed money (principal) that is generally repaid with interest.

Lock-in period : The time period during which the lender has guaranteed an interest rate to a borrower.

Mortgage :
a) A lien upon land or other property as security for loan.

b) A legal document that pledges the borrower’s property to the lender as security for payment of a loan.

Mortgagee : The lender in a mortgage agreement.

Mortgagor/mortgager : The borrower in a mortgage agreement

Personal property : Any property that is not real property.

Prepayment penalty : A fee that is charged to a borrower who pays off a loan before it is due.

Principal : The amount borrowed in the beginning, or the money still remaining unpaid (remaining balance) after successive monthly repayments.

Private mortgage insurance : Mortgage insurance that is provided by a private mortgage insurance company to protect lenders against loss if the borrower defaults.

Real property : Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.

Second mortgage : A mortgage that has a lien position subordinate to the first mortgage.

Secured loan : A loan that is backed by collateral.

Security : The property that will be pledged as collateral for a loan.