Glossary : Refinance Loans

Acquisition fee

A fee charged by some auto financing companies for originating the loan, just as mortgage lenders charge points as an origination fee. This fee is often not specified in a contract but rolled into the capitalized cost when calculating monthly payments.

Adjustable rate mortgage (ARM)

A mortgage rate on a mortgage loan for which the interest rate, after an initial period, is adjusted periodically according to a pre-selected index. The rate varies and is not fixed.

Amortization

The repayment of principal from scheduled mortgage payments that exceed the interest due. The scheduled payment less the interest equals amortization. The loan balance declines by the amount of the scheduled payment, plus the amount of any extra payment.

APR

The Annual Percentage Rate, which must be reported by lenders under Truth in lending regulations. It is a comprehensive measure of credit cost to the borrower that takes account of the interest rate, points and flat dollar charges. It is also adjusted for the time value of money so that dollars paid by the borrower up-front carry a heavier weight than dollars paid ten years down the road. However, the APR is calculated on the assumption that the loan runs to term and is therefore potentially deceptive for borrowers with short time horizons.

Appraisal

A written analysis prepared by a qualified appraiser and based on multiple variables estimating the value of a property. A current appraisal is often required most lenders before making a mortgage refinance loan.

Appraised Value

An appraised value is an opinion of a property's fair market value based on an appraiser's knowledge, experience and analysis of the property.

Asset

Anything owned of monetary value including real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, etc.).

Home Loan Modification

Home Loan modification is now a US Government sponsored way to modify existing mortgages to make them more affordable and fiscally attractive to a lender. A modified loan protects the credit rating of a borrower and it also helps lenders in showing less defaulting loans in their portfolio. This is an important tool in working with mortgages that are in difficult financial circumstances.

Private Mortgage Insurance (PMI)

There is one more way in cutting the cost and saving money by avoiding private mortgage insurance payment, or the PMI as it is commonly referred to. PMI is basically an insurance required by lenders if the borrower desires to borrow more than 80 percent of the home's value. This cost can go up to hundreds of dollars on an annual basis.