Mortgage Sub-glossary

Glossary | Broker | Investor | Legal | Mortgage | Owner | Renter


An adjustable-rate mortgage, abbreviated as A.R.M., is an instrument in which the interest charged is tied to a specific index on a specified adjustment date.


Amortization occurs when a mortgage payment applies to interest, and the remainder to borrowed principal, until zero is achieved.


An appraisal is a property’s evaluation for the purpose of securing a mortgage.


An asset/liability statement is a list of investments and debts: assets minus liabilities equals an individual’s net worth.


Assets are investments or items of value; a liquid asset is one that can be readily converted to cash.


An assumable mortgage is an instrument that may be transferred to a new qualified owner.


An Aztec recognition agreement acknowledges that a lender in a co-operativeownership apartment house has an interest, and permits recourse if a borrower defaults.


A balloon mortgage is an instrument comprising monthly payments, retired with one lump-sum payment.

A comparative market analysis, abbreviated as comps, evaluates recent similar property sales compared with current competition in the marketplace, to determine a property’s current market value.

Conventional mortgage refers to a home loan meeting government criteria.

A credit report reflects an individual’s credit history, and is used by co-ownership management companies and landlords in verifying an applicant’s creditworthiness.

To default is to fail to perform an obligation.

Discount points refers to any additional percentage of the loan amount for which a lender asks.

A down payment is the cash portion of the purchase price; the remainder is the amount financed, determined by both the lender and the house rules and policies.

Effective interest rate is the actual interest paid.

The fair market value is an agreed-upon purchase price under free-market conditions: reasonable competition among buyers; limited pressure on the seller.

The finance charges to a borrower include an origination fee, a service charge, discount points, a credit report fee, the often forgotten finder’s fee (to the mortgage broker), New York City mortgage tax, and, of course, interest.

A financial statement concisely accounts for an individual’s or a corporation’s financial activities.

A fixed-rate mortgage’s interest rate remains constant.


A foreclosure proceeding seeks to enforce a past-due mortgage or lien payment.


Fully amortizing mortgages are ones that are paid down at full term.


The Home Buyer’s Guide is a booklet citing government regulations concerning the financial aspects of a mortgage settlement.

A home equity conversion mortgage, referred to as a reverse mortgage, allows an owner to convert equity into cash by receiving monthly payments against a property’s value.

A home equity loan or line of credit or second mortgage, against the equity of a property, requires board of directors’ approval in a co-operatively-owned apartment house.

The inflation rate is the increased amount of money necessary to purchase same goods and equal services.

An instrument is a legal document.

An insured mortgage includes a private-mortgage insurance (P.M.I.) clause guaranteeing monthly payments.

An interest-only mortgage does not pay down, or amortize, the principal, which is paid entirely at the end of its term.

Interest rate is the percentage charged for the use of money.

Interim financing is a temporary bridge, or short-term swing loan, using equity in owned property, before a standard mortgage is in place, or before a present home is on the market for sale.

A jumbo loan exceeds a regulated limit and carries a higher interest rate.

Lender refers to the original lending institution.


Liabilities are financial obligations.


A loan is borrowed money.


A loan commitment is a lending institution’s obligation to grant a principal amount.


The loan origination fee is the finance charge, above and beyond interest, imposed by a lender; loan service is the payments to a lender for the use of its capital.


A loan pre-approval letter is a lender’s opinion—not a pledge—that the loanseeker is creditworthy up to the amount stated; a time period and an interest rate are not stated.


A loan-to-value ratio places a percentage of the current sales price as compared to the loan amount.


A lock-in rate is a guaranteed interest rate available to a borrower on a specified instrument and for a stated period of time.


Market price, or market value, is the amount offered by a willing buyer and agreed to by a seller, provided that both are performing under normal conditions and in reasonably good mental health.


A mortgage broker arranges a loan between a lending institution and a purchaser.


A mortgage instrument is the document granting a set mortgage-principal amount wherein a real-estate property title serves as collateral, ensuring that the mortgagor (obligor) will fulfill the obligations and satisfy (make full repayment) the mortgagee (obligee), according to prescribed terms and conditions.


Mortgage points comprise a one-time charge—calculated as a percentage of the principal amount and paid up front—to cover the lender’s business costs; the origination fee is an additional service fee over and beyond costs.


A mortgage-qualifying ration is a calculation of a buyer’s creditworthiness, using housing cost as a percentage of income, including monthly debt, such as average credit balances, loans, and revolving credit balances.


A mortgage satisfaction document is generated by a lender immediately following final payment.


Mortgage tax is levied by New York City at every conveyance of real property purchased with a loan.


A negative amortization, or payment cap, is a minimum payment that does not meet a revised or fluctuating interest rate, which causes a deferred shortfall and is added to the principal balance yet paid down.


A no-points loan includes a lender’s costs with principal to be repaid.


A note is the portion of a mortgage instrument that calls for the borrower to repay the loan, and includes the time period and interest rate.


The origination fee is the lender’s charge to grant a loan.


Origination principal balance defines the mortgage amount before the initial payment.


A payment-change date occurs during the month immediately following that of a notice of an adjusted interest rate.


A periodic cap is a limit to an increase and/or decrease in the periodic rate charged during a given period, regardless of whether the index used to calculate the mortgage-rate fluctuation becomes adjusted.


Pre-approval occurs when, under current circumstance, an underwriter has completed an individual’s review and would agree to lend up to a stated principal amount with specific real property as the collateral.


Prepayment is the paying down of the principal balance prior to its due date, when the loan reaches full amortization.


A prepayment clause cites the prepayment penalty, or surcharge, for paying down a mortgage before it has reached full term.


Prequalification is a written opinion regarding a purchaser’s creditworthiness after the consideration of a credit report score, debt and income flow, and liabilities and assets, readily available as cash, as well as those illiquid.
Prime rate refers to the most favorable interest rate a lender is able to offer.


Principal, interest, taxes, and insurance, abbreviated as P.I.T.I., comprises the four elements included in a conventional mortgage.


Private mortgage insurance, abbreviated as P.M.I., is required when the cash-down portion is less than 20 percent of the sale price.


The Real Estate Settlement Procedures Act, abbreviated as RESPA, regulates loans for which real estate is used as security.


A recognition agreement, between a co-operative corporation and a purchaser’s lender, evidences ownership in the corporation with the right to possess the apartment collateralizing the loan.


Reconciliation is an appraiser’s adjustments when correlating a comparative market analysis, or comps, of a target property.


Regulation Z defines the Federal Consumer Credit Protection Act rules and guidelines requiring lenders to fully disclose the terms, conditions, percentage rate, and any other charges to a borrower.


Repossession is the taking back of a property due to breach of a contract, particularly associated with nonpayment of a mortgage loan.


Revolving credit or debt allows the purchasing or borrowing of funds against a pre-approved, unsecured credit line.


A sales-comparison approach is the equivalent of a comparative market analyses.


A second mortgage is always subordinate to a primary mortgage.


A service fee is paid by a borrower to cover a lender’s business cost, paid at the closing or added to the principal amount.


Servicing a mortgage is the making of payments by borrowers.


Supply and demand is the economic principle that the greater the supply, as compared to market demand, the lower the value; it follows, then, that the smaller the supply or greater the demand, the higher the value; by evaluating a property’s scarcity factor, an appraiser adjusts the market value for supply in relation to demand.


A term or straight-term mortgage requires interest-only payments until said term ends.


An underlying mortgage is the equivalent of a first mortgage when a wraparound mortgage is in place.


A valuation approach comprises all know facts, including location, age, square footage, and condition, which indicate its value in exchange—the current market price.


A wraparound mortgage provides funds that supplement a first mortgage, or underlying mortgage.