Key Terms in Mortgage
As is common with most areas of expertise, mortgage industry is also full of jargons and terms that may seem confusing. These play significant roles in deciding the amount you eventually end up paying for your property. Let's try and explore some of the most commonly used terms in the mortgage industry. Application Fee: An application fee is the amount that the mortgage lender will charge in order to process your applications. This processing may include charges for appraising the property or generating credit report. Appraised Value: The appraised value is the value of the property when appraised by a lender or a certified property evaluator.
An appraised value is generally different from the Sale value of the property. Borrower: Borrower is the one who mortgages the property to the lender and takes the loan. A mortgage can have multiple borrowers. Interest Rate: This is the periodic charge on the borrower's monthly installment towards payment of the loan amount.
Interest rate is expressed in percentage and is dependent on the market condition. A lender generally assures the borrower a particular rate of interest which is referred to as a 'lock in' rate. This rate is valid for a certain time period and provides security to your interest amount against market fluctuations. Loan Amount: This is the amount that the mortgage lender lends to the borrower against the mortgage of the property. This amount could be as high as 95 of the property price.
A borrower with higher disposable income can make more payment if they desire so. Mortgage Lender: In mortgage, a lender is generally a financial institute a bank or a broker firm that has the necessary disposable amount to pay for the property. A mortgage banker originates mortgage loans, loans the borrower funds and closes the loan in their name. Mortgage brokers do not fund the loan by themselves but work in behalf of bankers to do the brokerage of the loan.
Mortgage Points: Mortgage points refer to certain charges that need to be paid in order to obtain a mortgage on a property. As a borrower remember that there are two different kinds of mortgage points. These are discount points and origination points. The lenders do not all charge the same amount for these different types of points. Refinance: This applies to the borrowers who are taking a second mortgage on their property. Often people take out a second mortgage in order to refinance because they plan to pay off the first mortgage.
A refinance is essentially financing the property again. Sale Value: This is the value at which the borrower buys the property. It is part of the Sale Value that the borrower pays as down payment to the seller and borrows the rest from a mortgage lender in the form of a loan.
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