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 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.
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 is the first step towards forclosure
and the loss of the property. Generally, the mortgage is
payment is more than 30 days late. Breaking other agreements
in the mortgage can also cause the mortgage to go into default.
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.
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
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 stands for the U.S. Department of Housing and Urban
Development. The Office of Housing/Federal Housing Administration
HUD insures home mortgage loans made by lenders and sets
minimum standards for such homes.
Interest is the charge paid for borrowing money. It’s
the rent you pay for using someone else’s money. (See
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.
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.
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.
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
The mortgagee is the lender in a mortgage agreement.
The mortgagor is the borrower in a mortgage agreement.
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 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 is the amount borrowed. It is the amount that you
pay interest on.
Refinancing means getting a new loan for the same property
and using that money to pay off the old loan.