Glossary

Get easy to understand definitions for common mortgage terms from the Mortgage Insider. In our glossary, we define the word, tell you about in industry usage, and usually give an example so you can fully and easily understand not just the meaning but the function of the word.

Add On

Add On Defined
An add on is a cost to the borrower for risk-based conditions on their mortgage like cash out, investment, FICO scores, minimal down payment or equity, and waiving escrows. The add on is charged as a percentage of the loan amount as a discount point, at the time of rate lock, if [...]

Adjustable Rate Mortgage - ARM

Adjustable Rate Mortgage - ARM - Defined
A mortgage that carries provisions to change the interest rate periodically. Remember if the rate can ever change..even once..it’s an adjustable rate mortgage.
Adjustable rate mortgages have a long history in the US starting back in the 1960’s and then once inflation took off in the 1970’s, folks noticed [...]

Adjustment Period

Adjustment Period Defined
On an adjustable rate mortgage (ARM), the adjustment period is the time allotted between interest rate recalculation.
The most common adjustment period for convention ARMs is 1 year. So the adjustment period is 12 months meaning every 12 months the rate changes thereby changing the payment as well. The borrower will [...]

Amortization

Amortization Defined
Amortization is the repayment of a mortgage with scheduled payments that include principal and interest. At the end of the scheduled term when all the payments have been made, the mortgage is paid back in full including the interest.
The opposite of an amortized mortgage is an interest only mortgage. That payment only [...]

Amortization Schedule

Amortization Schedule Defined
An amortization schedule is a breakdown of all the mortgage payments needed until the mortgage is paid in full. Your mortgage payment includes 2 parts, the principal and the interest. An amortization schedule shows you how much is going toward the principal and how much is going toward the interest for [...]

Annual Percentage Rate

Annual Percentage Rate Defined
Annual Percentage Rate or APR is a rate of interest that includes certain costs and fees for the mortgage in addition to the interest rate expressed as a yearly rate. The APR rate is not the rate your payment is calculated from.
It was supposed to make mortgage shopping easier [...]

Appraisal

Appraisal Defined
An appraisal is an estimate of the current market value of a home. The appraisal has to be included in the loan package submitted to the underwriter whether the loan applied for is a purchase or a refinance.
Residential appraisals use the “sales comparison” method to determine market value. The appraiser [...]