- Amortization: The process of paying off a debt, such as a mortgage, over a set period of time through regular payments.
- Annual percentage rate (APR): The total cost of a mortgage loan, including interest and fees, expressed as an annual percentage of the loan amount.
- Closing costs: The fees associated with finalizing a mortgage loan, including appraisal, title search, and legal fees.
- Collateral: An asset that is pledged as security for a loan, such as a house in the case of a mortgage.
- Debt-to-income ratio (DTI): A measure of a borrower’s ability to repay a loan, calculated as the ratio of monthly debt payments to monthly income.
- Equity: The value of a homeowner’s stake in their property, calculated as the difference between the home’s value and any outstanding mortgage debt.
- Fixed-rate mortgage: A mortgage with a set interest rate that remains the same for the life of the loan.
- Interest rate: The percentage charged by a lender for borrowing money.
- Loan-to-value ratio (LTV): A measure of the amount of a mortgage loan compared to the value of the property, expressed as a percentage.
- Mortgage insurance: Insurance that protects lenders in case a borrower defaults on a mortgage loan.
- Pre-approval: A process by which a lender assesses a borrower’s creditworthiness and provides a conditional approval for a mortgage loan.
- Principal: The amount of money borrowed for a mortgage loan.
- Refinancing: The process of replacing an existing mortgage with a new one, often to take advantage of lower interest rates.
- Term: The length of time over which a mortgage loan is paid back.
- Underwriting: The process by which a lender assesses a borrower’s creditworthiness and determines whether to approve a mortgage loan.
