Since I haven't found a hand held translator that covers this mortgage speak, I've compiled a list of some of the common words that you may hear during your transaction and I've translated them for you.
ADJUSTABLE RATE MORTGAGE This is a mortgage product that allows for the interest rate to change during the life of the loan. The terms of changes are pre-arranged. (aka - ARM, Variable Rate Mortgage)
AMORTIZATION SCHEDULE A timetable or schedule that shows the amount of each payment is applied to interest and principal. It typically shows the remaining principal balance after each payment.
AMORTIZE To repay a mortgage or loan with regularly scheduled principal and interest payments.
ANNUAL PERCENTAGE RATE This is the true cost of the mortgage. It is the interest rate plus any additional costs (i.e., points, mortgage insurance, other fees) stated as an annual rate. It is not a simple interest rate or note rate. (aka - APR)
APPRAISAL This is a written report, prepared by a qualified appraiser. It details all aspects of the home (collateral), including market conditions, current sales data of similar homes in the same neighborhood and current construction costs of the home. It is used to estimate the value of the home being mortgaged.
ASSET Anything of monetary value. Some common examples of personal assets are bank accounts, retirement accounts, 401K accounts, other real estate, vehicles, art work, jewelry and any other personal property.
BALLOON MORTGAGE This is a mortgage product that has a fixed payment for a set amount of time. It is amortized over a long period of time, normally 30 years. However, it has a lump sum payment of the remaining principal balance after a set number of years, which is prior to the amortized length of time. For instance, a five year balloon is amortized over 30 years, but the principal balance is due at the end of the fifth year of the loan. (aka - Mortgage with a call "5 year call")
BUYDOWN MORTGAGE This is a mortgage product that has a lower interest rate for the first two to three years. The interest rate will increase in preset increments until it reaches the true interest rate. The interest rate will not change again during the life of the loan.
