The process of paying off a loan over time through regular payments. An amortization schedule details how much of each payment goes toward the principal and how much goes toward interest.
Annual Percentage Rate (APR)
The annual rate charged for borrowing, expressed as a single percentage that represents the actual yearly cost of the loan.
One-time fees and expenses paid at the closing of a mortgage transaction, separate from the loan itself.
The initial upfront payment made when buying a home, usually expressed as a percentage of the total property price.
The value of ownership built up in a property, calculated by taking the current market value minus the remaining mortgage balance.
An account held by a third party to manage the payment of property taxes and insurance.
A mortgage with an interest rate that remains the same for the entire term of the loan.
The cost of borrowing money, typically expressed as an annual percentage rate.
Loan-to-Value Ratio (LTV)
The ratio of the loan amount to the appraised value or sales price of the property, expressed as a percentage.
Insurance that protects the lender in case the borrower defaults on the loan. Typically required for loans with an LTV ratio greater than 80%.
The original amount of money borrowed, not including interest.
The process of obtaining a new mortgage to replace an existing one, often to obtain a lower interest rate or to convert equity into cash.
The length of time over which the loan must be repaid. Common terms are 15, 20, or 30 years.
The process lenders use to evaluate the risk of offering a mortgage to a borrower, including creditworthiness and the value of the property.
Variable-Rate Mortgage (or Adjustable-Rate Mortgage)
A mortgage with an interest rate that may change periodically depending on market conditions, affecting the monthly payment.