Adjustable Rate Mortgage (ARM):
A mortgage loan or deed of trust that allows the lender to adjust the interest rate. The rate change is agreed to at the inception of the loan.
Amortize:
Repayment of debt with payments of both principal and interest calculated to pay off the debt at the end of a specified time period.
Balloon Mortgage:
A mortgage with installments of principal and interest that do not fully amortize the loan. The balance of the mortgage is due in a lump sum, usually at the end of the term.
Buydown Mortgage:
A mortgage with a below market interest rate that results in lower monthly payments. A buydown is made by the lender in the form of “points” in return for money received from the builder, seller or homebuyer.
Cash for Keys:
A deal a lender may make with a homeowner. The homeowner gets a cash settlement in exchange for vacating his/her foreclosed home and leaving the home in good condition.
Convertible ARM:
An ARM that may be converted into a fixed rate mortgage within an agreed-upon time period. There is usually a fee when the loan converts.
Deferred Payments:
Payments the lender agrees to postpone as part of the workout process when facing foreclosure.
Equity:
The net value of an asset. In terms of your home, the difference between the value of the property and the amount you owe on the mortgage.
Escrow:
Sometimes called impounds or reserves. Money or documents deposited with a third party to be delivered upon fulfillment. For example: a borrower deposits money with the lender to pay taxes and insurance on a property when they become due.
Fixed-Rate Mortgage:
A mortgage where the interest rate and payments remain the same for the life of the loan: typically 15 or 30 years.
Forbearance:
An arrangement in which the lender agrees not to take legal action if a homeowner arranges to pay the amount owed on a mortgage by a specified date.
Foreclosure:
A legal process where a mortgaged property is sold to recover the amount owed.
Refinance:
The payoff of an existing loan with a new loan using the same property as security.
Repayment Plan:
An arrangement in which the borrower makes additional payments to pay down the past-due amount while still making regularly scheduled payments.
Workout: Also called restructure. An alternative to foreclosure. Can include loan modification, short sales or forbearance.
The information on this website is deemed reliable but it is not guaranteed you should consult a professional before making a decision to take any action.
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