Financial Planning 100 Point Learning Contract
Real Estate Vocabulary - Related to Mortgages
Acceleration Clause
Some mortgages have the rule that if the payments fall behind or you break other rules of the mortgage, you have to pay the whole amount you owe right then.

Amortization
Amortization is a payment plan spread out over time.

Assumption of Mortgage
Taking over an existing mortgage from the previous owner of the property is called assumption of mortgage. The company that owns the mortgage usually has to agree to this. The previous owner no longer has any responsibility for the loan.

Conventional Mortgage
A conventional mortgage is mortgage loan not insured by HUD or guaranteed by the Veterans' Administration.

Deed of Trust
A deed of trust is like a mortgage. It lets real estate property be security for a debt. If the borrower does not make his payments, the holder of the deed of trust can sell the property at a public sale. Deeds of trust give borrowers less legal protection than mortgages.

Default
Default is the first step towards forclosure and the loss of the property. Generally, the mortgage is in default if payment is more than 30 days late. Breaking other agreements in the mortgage can also cause the mortgage to go into default.

Equity
Equity is the difference between how much a property is worth and how much is still owed on the mortgage. It is the amount of money you would get to keep if a property was sold and the mortgage was paid off.

Escrow
When you pay your monthly mortgage, some of that money is held in an escrow account to pay large yearly expenses, like insurance and taxes. Property is also held in escrow by a third party during the purchase process to protect the buyer and seller from fraud.

Foreclosure
Foreclosure is a legal term for any of the ways of forcing payment of a mortgage debt or deed of trust. Foreclosure permanently removes the borrower from the property and gives the title of the property to the lender.

HUD
HUD stands for the U.S. Department of Housing and Urban Development. The Office of Housing/Federal Housing Administration within HUD insures home mortgage loans made by lenders and sets minimum standards for such homes.

Interest
Interest is the charge paid for borrowing money. It’s the rent you pay for using someone else’s money. (See mortgage note)

Lien
If someone has a lien of a property, that property cannot be sold or transferred until that lien is removed. A mortgage always puts a lien on the mortgaged property.

Mortgage
To secure the money being borrowed for a property, a mortgage puts a lien on the property. It cannot be sold or transferred until the mortgage is paid. Mortgages last from 10 to 30 years while the loan is paid off.

Mortgage Commitment
A mortgage commitment is written notice from the bank or other lending institution saying it promises to give a mortgage to a person.

Mortgage Insurance Premium
Mortgage insurance protects the lender in case the borrower defaults on the loan. It pays the difference between what is owed on the mortgage and what the lender sells the home for after foreclosure. Mortgage insurance is required when borrowers do not have large enough downpayments. The borrower has to pay for this insurance.

Mortgage Note
A mortgage note is a written agreement to repay a loan.

Mortgage (Open- End)
An open-end mortgage allows you to borrow some more money in the future without refinancing the loan or paying additional financing charges.

Mortgagee
The mortgagee is the lender in a mortgage agreement.

Mortgagor
The mortgagor is the borrower in a mortgage agreement.

Points
Points are sometimes called "discount points." A point is one percent of the amount of the mortgage loan. For example, if a loan is for $25,000, one point is $250. Sometimes lenders give borrowers the choice of a lower interest rate of they pay one or more “points” on their loan.

Prepayment
Prepayment is payment of mortgage loan, or part of it, before due date. Some mortgage agreements limit your right to do this or charge a penalty, but FHA insured mortgages cannot.

Principal
Principal is the amount borrowed. It is the amount that you pay interest on.

Refinancing
Refinancing means getting a new loan for the same property and using that money to pay off the old loan.