Mortgage Glossary








Glossary of terms that are commonly used in a mortgage loan process.


Mortgage glossary

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Acceleration clause
A contractual provision that gives the lender the right to demand repayment of the entire loan balance in the event if the borrower violates one or more clauses in the note

Accrued interest
Interest that is earned but not paid, adding to the amount owed. It's in the interest of the borrower to avoid accrued interest.

Adjustable-rate mortgage
Home loan in which the interest rate is changed by the lender periodically based on a standard financial index. Most ARMs have caps on how much an interest rate may increase. In the US most ARMs basic rate changes on a pre-selected interest rate index over which the lender has no control.

Amortization
The repayment of principal from scheduled mortgage payments without the interest due. It's the pure repayment of principal of loan amount.The loan balance declines by the amount of the scheduled payment, plus the amount of any extra payment.

Amount financed
Loan amount less prepaid charges, which are lender fees paid at closing. For example, if the loan is for 50,000 and the borrower pays the lender $1,000 in fees, the amount financed is $49,000. The loan is decreased by the lenders' fees.

Annual percentage rate (APR)
The APR is a measure of the cost of credit, expressed as a yearly rate.The APR of loans is calculated in a standardized way that takes fees into account, making it easier to compare loans. Unfortunately, in mortgages, the APR is of limited value, since by law lenders can omit some fees, rendering meaningful comparisons difficult.

Appraiser
A professional with knowledge of real estate markets and skilled in the practice of appraisal. When a property is appraised in connection with a loan, the appraiser is selected by the lender, but the appraisal fee is usually paid by the borrower.

Assumable mortgage
A mortgage contract that allows, or does not prohibit, a creditworthy buyer from assuming the mortgage contract of the seller.
Assumption is a method of selling real estate where the buyer of the property agrees to become responsible for the repayment of an existing loan on the property.