Some of the most complicated real estate language may be that which involves the mortgage. It’s important that before you ever borrow a significant amount of money, you fully understand the terms and conditions of the loan. The following are a few mortgage terms you may encounter:
· Private Mortgage Insurance (PMI): this shields the lender from financial loss should the homeowner default on the mortgage.
· Down Payment: This is the percentage of the home’s purchase price that the buyer pays in cash and that isn’t financed with the loan money.
· Principal: The amount that is borrowed.
· Amortization: A payment plan that enables the borrower to reduce debt gradually through monthly payments of principal and interest.
· PITI: An acronym for principal, interest, taxes and insurance, which are the four basic parts of the monthly portage payment.
· Interest-only Mortgage: A loan in which only the interest is paid on a monthly basis, and the principal is paid off all at once.
· ARM: An acronym for adjustable-rate mortgage. Instead of having a fixed interest rate for a term of 15 to 30 years, and adjustable-rate mortgage will have fluctuating interest.
· Loan-to-value ratio: The ratio of the amount the buyer wants to borrow compared to the value of the property.
For more information on mortgages, call us. As your real estate professionals, we are qualified to answer your questions, and are eager to help you with all your home buying and selling needs.