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The portion of a borrower’s monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves.
A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (such as one, three, and five year U.S. Treasury security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average costs-of-funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable mortgage up or down.
The sum of the published index plus the margin. For example if the index is 4% and the margin is 2.75%, the indexed rate would be 6.75%. Often, lenders charge less than the indexed rate the first year of an adjustable rate mortgage.
This refers to the original interest rate of the mortgage at the time of closing. This rate changes for an adjustable rate mortgage (ARM). It’s also known as “start rate” or “teaser.”
The regular periodic payment that a borrower agrees to make to a lender.
A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI).
The fee charged for borrowing money.
The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments.
An arrangement that allows the property seller to deposit money to an account. That money is then released each month to reduce the mortgagor’s monthly payments during the early years of a mortgage.
For an adjustable rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.
For an adjustable rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.
A construction loan made during completion of a building or a project. A permanent loan usually replaces this loan after completion.
A money source for a lender.
