Home Mortgage Refinance Terminology Explained
While jargon is not always something that is easy to understand when trying to make a decision about refinancing a home loan, professional business jargon is exactly what the borrower will come across because there are certain terms that are exclusive and specific to the industry. So, if you are looking to refinance your existing loan, it would be best to learn and familiarize yourself with home mortgage refinance terminology.
A Brief List of Common Terms
- Mortgage: A loan for the purpose of purchasing a home. Mortgages generally have 10, 15, 20 or 30 year durations. While the homeowners has title to the property, the lender has a lien against it because they provide the loan necessary for the homeowner to purchase the property.
- Adjustable Rate Mortgage (ARM): This is a loan with an interest rate that changes based on preset terms and conditions. ARM mortgages are attractive to consumers hoping to eventually gain an interest rate that is lower than the national average, or plan on selling their home quickly.
- Fixed Rate Mortgage: A loan with an interest rate that stays the same through the duration of the entire loan.
- Refinancing: Paying off one loan with another and using the same home as collatera.
- Title: A document that displays proof of who owns the property.
- Cash Out Refinance: A refinanced loan that is more than what is needed to pay off the balance. The additional funds (cash) is then used for other purposes such as education, bill consolidation, remodeling or adding on.
- Yield: The amount of interest that has been generated over the course of the mortgage.
- Balance: The remaining amount owed on the loan that is a combination of interest and principal.
- Interest: This is the “fee” charged on the loan based on a accumulating set percentage of the remaining balance.
- Annual Percentage Rate (APR): The specific interest that a mortgage carries. A 3.4% interest rate would be listed as having a 3.4% APR.
- Lien: This is a claim to the dwelling based on money owed. When you take out a home loan, the lender will also be the lien holder of the property as well.
- Principal: The original amount of the loan, not including interest paid on it.
- First Mortgage: Loan that is the primary lien against the property that is purchased.
- Foreclosure: The seizing of the property by the lender once the mortgage has gone into default due to nonpayment.
Research and Understand the Terms
It is advisable that if you come across any terminology you are not familiar with to look it up. Do not make any assumptions about any home mortgage refinance terminology since these are very specific terms reflecting very specific purposes. You do not want to make any errors with the terms.
The Refinance Home Mortgage Guide is your resource for educating yourself in the process of securing a new loan, and finding reputable lenders in your state to work with in securing better terms.