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Real Estate Glossary
For your convenience, we've compiled a list of words and phrases to help you understand Real Estate better.
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The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage.
Looking for terms related to principal?
to see them.
The loan payment consists of a portion which will be applied to pay the accruing interest on a loan, with the remainder being applied to the
. Over time, the interest portion decreases as the loan balance decreases, and the amount applied to
increases so that the loan is paid off (amortized) in the specified time.
A table which shows how much of each payment will be applied toward
and how much toward interest over the life of the loan. It also shows the gradual decrease of the loan balance until it reaches zero.
A mortgage in which you make payments every two weeks instead of once a month. The basic result is that instead of making twelve monthly payments during the year, you make thirteen. The extra payment reduces the
, substantially reducing the time it takes to pay off a thirty year mortgage. Note: there are independent companies that encourage you to set up bi-weekly payment schedules with them on your thirty year mortgage. They charge a set-up fee and a transfer fee for every payment. Your funds are deposited into a trust account from which your monthly payment is then made, and the excess funds then remain in the trust account until enough has accrued to make the additional payment which will then be paid to reduce your principle. You could save money by doing the same thing yourself, plus you have to have faith that once you transfer money to them that they will actually transfer your funds to your lender.
Once you close your purchase transaction, you may have an escrow account or impound account with your lender. This means the amount you pay each month includes an amount above what would be required if you were only paying your
and interest. The extra money is held in your impound account (escrow account) for the payment of items like property taxes and homeowner's insurance when they come due. The lender pays them with your money instead of you paying them yourself.
This stands for
, interest, taxes and insurance. If you have an "impounded" loan, then your monthly payment to the lender includes all of these and probably includes mortgage insurance as well. If you do not have an impounded account, then the lender still calculates this amount and uses it as part of determining your debt-to-income ratio.
Any amount paid to reduce the
balance of a loan before the due date. Payment in full on a mortgage that may result from a sale of the property, the owner's decision to pay off the loan in full, or a foreclosure. In each case, prepayment means payment occurs before the loan has been fully amortized.
principal, interest, taxes and insurance (PITI)
The four components of a monthly mortgage payment on impounded loans.
refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance.
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