Home Equity Loan

: Money that is borrowed against the equity of a home.
Mortgage Glossary

  • Appraisal

    : The assessed value of a home from an independent, certified agency or person.

  • Credit Score

    : A numerical value that represents the assessed risk of a particular individual. Several elements go into a credit score such as payment history, types of accounts, debt history, and recent credit inquiries.

  • Down Payment

    : A lump sum payment made upfront when purchasing a home. Since a down payment counts towards the equity of a home, banks and mortgage loan agencies see larger down payments as a decrease in the risk of a loan.

  • Equifax

    : One of the three largest credit reporting agencies. Experian and Trans Union Corporation are the two other major agencies.

  • Equity

    : The difference in the value of a home after any mortgages, liens, taxes, and other money owned against the home have been subtracted from the home’s value.

  • Experian

    : One of the three largest credit reporting agencies. Equifax and Trans Union Corporation are the two other major agencies.

  • Home Equity Line

    : An open line of credit that is backed by the equity of a home. The lending agency specifies the maximum amount of money that can be borrowed from the open line.

  • Home Equity Loan

    : Money that is borrowed against the equity of a home.

  • Negative Amortization (also known as Neg Am)

    : A loan process and repayment plan where a borrower makes payments less than the interest due on a loan, resulting in the unpaid interest being added to the outstanding loan amount.

  • Option ARM

    : A special type of mortgage loan which allows the borrower to select from various payment options and amounts. Depending on the payment option selected, the loan balance may increase if the amount paid does not cover interest owed.

  • PITI (Principal, Interest, Taxes, and Insurance)

    : The total payment amount owed due to a mortgage, including principal, interest on the loan, taxes, and insurance. This is often viewed as the total monthly payment due for a home.

  • Principal

    : The remaining unpaid, non-interest portion of a loan balance.

  • Refinance

    : Replacing an existing loan with a new loan. Funds from the new loan are used to pay off the original borrowed amount.

  • Trans Union Corporation

    : One of the three largest credit reporting agencies. Experian and Equifax are the two other major agencies.

  • Adjustable-Rate Loans (also known as variable-rate loans)

    : Loans which often have a lower interest rate than fixed rate loans for a specified period of time. However, after the specified period of time, the interest rate on the loan fluctuates based on the current market conditions, resulting in an increase or decrease in monthly payments.

  • Annual Percentage Rate (APR)

    : The cost of borrowing the money expressed as an annual rate. This rate includes all the fees a lender charges a borrower.

  • Conventional Loans

    : Loans you obtain from a commercial bank or institution that are not insured or guaranteed by the government.

  • Escrow

    : Process by which an unbiased third party holds the money prior to closing. This way neither party will have to worry about trusting the other, but only the neutral third party institution.

  • Fixed-Rate Loans

    : Loans where the rate and monthly payment are fixed for the term of the mortgage. These loans usually have a life of 15, 20, or 30 years. Some newer fixed-rate products can have a span of up to 40 or even 50 years.

  • Interest Rate

    : Cost to a consumer for borrowing money. This rate fluctuates depending on market conditions, therefore making adjustable-rate loans (see above) unpredictable.

  • Loan Origination Fees

    : Service fees charged by an institution for processing the loan.

  • Lock-In

    : Written guarantee from a lender to a consumer / home buyer for a specified interest rate on a home loan, refinance, or second mortgage. These are temporary guarantees that usually only last 60 to 90 days.

  • Mortgage

    : An agreement between a lending institution and borrower that gives the lending institution the right to repossess the home if the borrower fails to pay.

  • Overages

    : A type of “kickback” the loan officer or broker can keep when the price of the loan is lower than the price the home buyer agrees to pay.

  • Points

    : Additional fees paid to the lending institution for originating the loan. One point equals one percent of the loan amount. Points can either be paid in cash at closing or borrowed with the mortgage, and are often paid upfront to reduce subsequent monthly payments.

  • Private mortgage insurance (PMI)

    : Type of insurance which protects the lender against a loss if a borrower defaults on the loan. It is usually required for loans in which the down payment is less than 20 percent of the sales price or, in a refinancing, when the amount financed is greater than 80 percent of the appraised value.

  • Thrift institution

    : General term for savings banks and savings and loan associations.

  • Transaction, settlement, or closing costs

    : Costs associated with the loan. This is not limited to and may include fees for: mortgage application; title examination; abstract of title; title insurance; property survey; deed preparation; mortgage and settlement documents; attorneys; public county recording; notary; appraisal; credit report.

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