Common terms to describe a loan include "creditor", debtor, and mortgage broker. The terms are easy to remember, but homeowners may not be aware of certain terms. Let's get to the bottom of some of them.
Creditor
The creditor refers to the financial institution, most commonly a bank. They provide the money in form of mortgage loans in winter springs. The mortgagee, or lender, is sometimes called the creditor.
Debtor
The person or group who owes a mortgage or loan money is called the debtor. They could also be called the mortgagee.
One home may be owned by several people, including a husband or wife, or close friends. Sometimes, a parent and child will also purchase a property. If this occurs, both individuals become debtors, not only the owners of a property.
Mortgage broker, financial advisor
Although mortgages are not easy to find, it is possible because there are many financial institutions that offer them. You may find mortgages offered by banks, credit institutions, Savings & Loans, and mortgage lender in Winter Springs. Prospective debtors have the option to use a broker to find the best mortgage for them at the lowest interest rates. However, the broker also acts on behalf of the lender to find other people who would be willing to take out these mortgages.
It is common for other parties to be involved in closing a mortgage or obtaining one. This could include financial advisors and lawyers. A financial advisor is someone who can learn about you, your income, and other details to provide the best advice regarding your loan needs.
Foreclosure
If the debtor cannot meet their financial obligations under the mortgage, the property is subject to foreclosure. Creditors can then seize the property to recoup any outstanding loan costs.
A typical procedure is to foreclose on a house and have the auction price applied towards the outstanding amount of the loan. The debtor can still be held liable for any remaining amount if the property sells at less than the outstanding mortgage balance.
Annual Percentage (APR)
The APR is the loan's interest rate minus any added costs, such as points, origination fee, and mortgage insurance premiums (if applicable).The APR would not be higher than the interest if there was no cost to obtain a loan.
Breakeven Point
The breakeven price is the time taken to recover costs associated with refinancing a mortgage. It is calculated as the sum of the closing costs and the difference in monthly payments.
ARM
This is an adjustable-rate mortgage, which allows the lender periodically to adjust its interest.
Fixed-Rate Loan Mortgage
A mortgage in whose interest rate does not change throughout the term of the loan.
Cap
Variable interest rates are a feature of ARMs. However, these fluctuations can be limited by law to a specified amount. These restrictions may limit how much the loan will adjust over a period of six months, an annual period, and for the duration of the loan. They are also known as "caps".
Index
A number is used in computing the interest rates for an ARM. The index is usually a published percentage or number. This could be the average interest rate, yield, or yield on U.S. Treasury bills. An additional margin is added to an index to determine what interest rate will be charged on an ARM.
Prime Rate
The interest rate is charged to customers who are bank preferred customers. Changes to the prime rate impact other rates, including mortgage interest.
Equity
A homeowner's financial interests in the property, or its value. Equity is simply the difference between the property’s fair value and the amount owed to its mortgage or other liens if any.
Home Equity loan
Secured loans secured by a certain property that was made against "equity", after the property had been purchased.
Amortization
A mortgage loan that is gradually repaid over time, usually in monthly installments of principal as well as interest. The amortization table breaks down the loan's payment amount by the principal, interest, unpaid balance, and interest.
Refinance with Cash-Out
If a borrower is looking to refinance his mortgage at a higher rate than the current loan balance and with the intention of taking out money for their personal use, it's called a "cashout refinance."
Appraised Value
An appraisal of a property to determine its fair market value. This is based upon the appraiser's experience, knowledge, and analysis. The home's value is an important factor in determining the amount of mortgage the house can or will qualify for.
Appreciation
A property's increase in value is a result of changes in market conditions, inflation, and other causes.
Depreciation
A decrease in property value, which is the opposite effect of appreciation. You should remember the difference between appreciation and decline. The home's appraised worth is an important factor in the mortgage.
Lock-in
A contract by which the lender guarantees that a certain interest rate will be paid for a predetermined amount of time at a predetermined cost.
Lock-In Period
The time during which the lender has guaranteed an introductory interest rate to a borrower. This is a different concept to a fixed mortgage as the lock-in period for a mortgage might be temporary and not over the loan's life.
You may be familiar with many of these terms, but it never hurts to look at them again and see how they tie in with your mortgage and refinance process.Now that you're familiar with the terms and conditions of a mortgage loan, let's get into the details about refinancing.
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