The original face value of the mortgage, not including
interest. ie. a $150,000.00 mortgage is made up of
$150,000.00 principal, plus interest.
Short for "principal and interest" owed on a mortgage.
Usually paid by the borrower each month as blended payments.
Principal, interest and tax payments on a mortgage.
Principal, interest, taxes and insurance payments owed on a
mortgage.
Money paid to a lender for the privilege of partially or
fully prepaying the principal balance of a mortgage.
An option in your mortgage to prepay specific amounts of the principal
balance. The lender may charge penalty interest on prepayment
options.
The amount you owe the lender at any given time, not
including interest.
The amount the lender charges for loaning you the money for
the mortgage. Expressed as a "interest rate"
percentage.
A mortgage loan in which the interest rate is set for a
specific term. At the end of this term, the mortgage will "roll over"
if the borrower and lender agree to extend the loan. If the
borrower and lender cannot agree upon terms, the lender must
be repaid in full. In
this case, the borrower will obtain financing from another
source to pay out the original lender. For example, a
mortgage on a 5 year term will roll-over, but the interest
rate will generally change.
Sometimes there is more than one mortgage on a property. In
the event of a default by the borrower, the holder of the
first mortgage will be repaid first by the proceeds of a
sale. The second mortgage lender would be paid with any
remaining proceeds.
A second mortgage is usually at a higher interest rate, due
to the increased risk assumed by the lender who is taking
second priority to the first mortgage. A second mortgage may be
arranged by your mortgage broker.
A mortgage "term" is the length of time for which
money is loaned at a given rate of interest. When the
term expires, you can either repay the remaining principal, renegotiate the
mortgage with your lender, or obtain new financing.
Fees charged by some lenders against expenses they incur in the lending transaction.
A mortgage whose payments can be fixed from one to five
years but whose interest rate could change monthly depending
on market conditions. If interest rates go down, the monthly
principal is reduced; if rates go up, the monthly payments
might not cover the interest owing and payments may be
increased for the next term. Most variable rate mortgages
allow prepayment of any amount (with certain minimums) on
any monthly payment date and usually without penalty.
The seller sometimes holds a mortgage instead of a lending
institution. In some cases it may be a second mortgage, with
a conventional lender holding the first mortgage.
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