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Glossary

Mortgage Terms Defined

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  • Mortgage Insurance Premium (MIP)
    The amount paid by a mortgagor for mortgage insurance.
  • Mortgage Life Insurance
    A type of term life insurance In the event that the borrower dies while the policy is in force, the debt is automatically paid by insurance proceeds.
  • Mortgage Loan
    A loan for which real estate serves as collateral to provide for repayment in case of default.
  • Mortgage Note
    See Note.
  • Mortgagee
    The lender in a mortgage loan transaction.
  • Mortgagor
    The borrower in a mortgage agreement.
  • Negative Amortization
    Amortization means that monthly payments are large enough to pay the interest and reduce the principal on your mortgage. Negative amortization occurs when the monthly payments do not cover all of the interest cost. The interest cost that isn't covered is added to the unpaid principal balance.(...)
  • Net
    After taxes.
  • Net Effective Income
    Gross income minus estimated federal income tax.
  • Net Worth
    The value of all of a person's assets, including cash.
  • Non-Assumption Clause
    A statement in a mortgage contract forbidding the assumption of the mortgage by another borrower without the prior approval of the lender.
  • Non-Conforming Loan
    A conventional loan that cannot be sold to Fannie Mae or Freddie Mac. Often these loans are larger than conforming loan amounts.
  • Non-Dischargeable Debt
    Debts, such as taxes and student loans that cannot be discharged during a bankruptcy liquidation.
  • Non Liquid Asset
    An asset that cannot easily be converted into cash.
  • Note
    A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
  • Notice of Default
    Written notice to a borrower that a default has occurred and that legal action may be taken.
  • Origination Fee
    A fee paid to a lender for processing a loan application. The origination fee is stated in the form of points. One point is 1 percent of the mortgage amount.
  • Owner Financing
    A property purchase transaction in which the party selling the property provides all or part of the financing.
  • Payment Cap
    Limit on the amount by which a borrower’s ARM payments may increase, regardless of rise in interest rates. This may result in negative amortization.
  • Payment Change Date
    Dates upon which the payment is subject to change. Products featuring negative amortization typically will include a payment change date which differs from the interest rate change date in frequency.
  • Per Diem Interest
    Interest calculated per day. Depending on the day of the month that the loan closes, you will have to pay interest from the closing date through the end of the month.
  • Periodic Payment Cap
    A limit on the amount that payments can increase or decrease during any one adjustment period.
  • Periodic Rate Cap
    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.
  • Permanent Loan
    A long-term mortgage of 10 or more years.
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