Glossary of Mortgage Terms O - Z
The total amount of principal owed on a mortgage before any payments are
A payment that is not sufficient to cover the scheduled monthly payment on a
mortgage loan. Normally, a lender will not accept a partial payment, but in times of
hardship you can make this request of the loan servicing collection department.
payment change date
The date when a new monthly payment amount takes effect on an adjustable-rate
mortgage (ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date
occurs in the month immediately after the interest rate adjustment date.
periodic payment cap
For an adjustable-rate mortgage where the interest rate and the minimum
payment amount fluctuate independently of one another, this is a limit on the amount that
payments can increase or decrease during any one adjustment period.
periodic rate cap
For an adjustable-rate mortgage, a limit on the amount that the interest rate
can increase or decrease during any one adjustment period, regardless of how high or low
the index might be.
This stands for principal, interest, taxes and insurance. If you have an
"impounded" loan, then your monthly payment to the lender includes all of these
and probably includes mortgage insurance as well. If you do not have an impounded account,
then the lender still calculates this amount and uses it as part of determining your
A cash amount that a borrower must have on hand after making a down payment
and paying all closing costs for the purchase of a home. The principal, interest, taxes,
and insurance (PITI) reserves must equal the amount that the borrower would have to pay
for PITI for a predefined number of months.
A point is 1 percent of the amount of the mortgage.
power of attorney
A legal document that authorizes another person to act on ones behalf.
A power of attorney can grant complete authority or can be limited to certain acts and/or
certain periods of time.
Any amount paid to reduce the principal balance of a loan before the due
date. Payment in full on a mortgage that may result from a sale of the property, the
owner's decision to pay off the loan in full, or a foreclosure. In each case, prepayment
means payment occurs before the loan has been fully amortized.
A fee that may be charged to a borrower who pays off a loan before it is due.
The interest rate that banks charge to their preferred customers. Changes in
the prime rate are widely publicized in the news media and are used as the indexes in some
adjustable rate mortgages, especially home equity lines of credit. Changes in the prime
rate do not directly affect other types of mortgages, but the same factors that influence
the prime rate also affect the interest rates of mortgage loans.
The amount borrowed or remaining unpaid. The part of the monthly payment that
reduces the remaining balance of a mortgage.
The outstanding balance of principal on a mortgage. The principal balance
does not include interest or any other charges. See remaining balance.
interest, taxes, and insurance (PITI)
The four components of a monthly mortgage payment on impounded loans.
Principal refers to the part of the monthly payment that reduces the remaining balance of
the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer
to the amounts that are paid into an escrow account each month for property taxes and
mortgage and hazard insurance.
Mortgage insurance that is provided by a private mortgage insurance company
to protect lenders against loss if a borrower defaults. Most lenders generally require MI
for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.
A written promise to repay a specified amount over a specified period of
A meeting in an announced public location to sell property to repay a
mortgage that is in default.
A deed that transfers without warranty whatever interest or title a grantor may have
at the time the conveyance is made.
real estate agent
A person licensed to negotiate and transact the sale of real estate.
Estate Settlement Procedures Act (RESPA)
A consumer protection law that requires lenders to give borrowers advance notice of
Land and appurtenances, including anything of a permanent nature such as structures,
trees, minerals, and the interest, benefits, and inherent rights thereof.
A real estate agent, broker or an associate who holds active membership in a local
real estate board that is affiliated with the National Association of Realtors.
The public official who keeps records of transactions that affect real property in the
area. Sometimes known as a "Registrar of Deeds" or "County Clerk."
The noting in the registrars office of the details of a properly executed legal
document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of
mortgage, thereby making it a part of the public record.
The process of paying off one loan with the proceeds from a new loan using the same
property as security.
The amount of principal that has not yet been repaid. See principal balance.
The original amortization term minus the number of payments that have been applied.
An arrangement made to repay delinquent installments or advances.
A credit arrangement, such as a credit card, that allows a customer to borrow against
a preapproved line of credit when purchasing goods and services. The borrower is billed
for the amount that is actually borrowed plus any interest due.
right of survivorship
In joint tenancy, the right of survivors to acquire the interest of a deceased joint
A technique in which a seller deeds property to a buyer for a consideration, and the
buyer simultaneously leases the property back to the seller.
A mortgage that has a lien position subordinate to the first mortgage.
The buying and selling of existing mortgages, usually as part of a "pool" of
A loan that is backed by collateral.
The property that will be pledged as collateral for a loan.
An agreement in which the owner of a property provides financing, often in combination
with an assumable mortgage.
An organization that collects principal and interest payments from borrowers and
manages borrowers escrow accounts. The servicer often services mortgages that have
been purchased by an investor in the secondary mortgage market.
The collection of mortgage payments from borrowers and related responsibilities of a
See HUD1 Settlement Statement
A housing development that is created by dividing a tract of land into individual lots
for sale or lease.
Any mortgage or other lien that has a priority that is lower than that of the first
tenancy in common
As opposed to joint tenancy, when there are two or more individuals on title to a
piece of property, this type of ownership does not pass ownership to the others in the
event of death.
A process by which a lender uses another party to completely or partially originate,
process, underwrite, close, fund, or package the mortgages it plans to deliver to the
secondary mortgage market.
A legal document evidencing a person's right to or ownership of a property.
A company that specializes in examining and insuring titles to real estate.
Insurance that protects the lender (lender's policy) or the buyer (owner's policy)
against loss arising from disputes over ownership of a property.
A check of the title records to ensure that the seller is the legal owner of the
property and that there are no liens or other claims outstanding.
transfer of ownership
Any means by which the ownership of a property changes hands. Lenders consider all of
the following situations to be a transfer of ownership: the purchase of a property
"subject to" the mortgage, the assumption of the mortgage debt by the property
purchaser, and any exchange of possession of the property under a land sales contract or
any other land trust device.
State or local tax payable when title passes from one owner to another.
An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury's daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market.
A federal law that requires lenders to fully disclose, in writing, the terms and
conditions of a mortgage, including the annual percentage rate (APR) and other charges.
An adjustable-rate mortgage (ARM) that has one interest rate for the first five or
seven years of its mortgage term and a different interest rate for the remainder of the
A fiduciary who holds or controls property for the benefit of another.
A mortgage that is guaranteed by the Department of Veterans Affairs (VA).
An agency of the federal government that guarantees residential mortgages made to
eligible veterans of the military services. The guarantee protects the lender against loss
and thus encourages lenders to make mortgages to veterans.