Glossary
negative
amortization
Some adjustable rate mortgages allow the interest
rate to fluctuate independently of a required minimum
payment. If a borrower makes the minimum payment it
may not cover all of the interest that would normally
be due at the current interest rate. In essence, the
borrower is deferring the interest payment, which
is why this is called "deferred interest."
The deferred interest is added to the balance of the
loan and the loan balance grows larger instead of
smaller, which is called negative amortization.
no
cash-out refinance
A refinance transaction which is not intended to put
cash in the hand of the borrower. Instead, the new
balance is caculated to cover the balance due on the
current loan and any costs associated with obtaining
the new mortgage. Often referred to as a "rate
and term refinance."
no-cost
loan
Many lenders offer loans that you can obtain at "no
cost." You should inquire whether this means
there are no "lender" costs associated with
the loan, or if it also covers the other costs you
would normally have in a purchase or refinance transactions,
such as title insurance, escrow fees, settlement fees,
appraisal, recording fees, notary fees, and others.
These are fees and costs which may be associated with
buying a home or obtaining a loan, but not charged
directly by the lender. Keep in mind that, like a
"no-point" loan, the interest rate will
be higher than if you obtain a loan that has costs
associated with it.
note
A legal document that obligates a borrower to repay
a mortgage loan at a stated interest rate during a
specified period of time.
no-point
loan
Almost all lenders offer loans at "no points."
You will find the interest rate on a "no points"
loan is approximately a quarter percent higher than
on a loan where you pay one point.
notice
of default
A formal written notice to a borrower that a default
has occurred and that legal action may be taken.
original
principal balance
The total amount of principal owed on a mortgage before
any payments are made.
origination
fee
On a government loan the loan origination fee is one
percent of the loan amount, but additional points
may be charged which are called "discount points."
One point equals one percent of the loan amount. On
a conventional loan, the loan origination fee refers
to the total number of points a borrower pays.
owner
financing
A property purchase transaction in which the property
seller provides all or part of the financing.
©1996 By Leonard
Leonard & Associates, Inc. All rights reserved.
Duplication in whole or in part without permission
is prohibited.
