Accelerated amortization refers to the practice of making larger payments towards the principal amount of a loan than is required by the contractual payment schedule. This results in shortening the loan term and reducing the total interest paid over the life of the loan.
Add-on interest refers to an interest amount that is calculated at the start of the loan term and then added to the loan principal, resulting in equal installment payments over the entire loan period. This method typically results in a higher cost of borrowing compared to other interest calculation methods.
Amortization refers to the process of paying off debt over a specific period of time through regular payments of principal and interest, ultimately resulting in the full repayment of the loan by the end of the term.
An amortization schedule is a detailed table laying out the periodic payments on a loan, breaking them down into interest and principal components, as well as showing the remaining balance after each payment. It is vital for understanding how a loan is paid off and the interest incurred over time.
A balloon mortgage is a type of loan that does not fully amortize over its term, leaving a balance due at the end of the period in a balloon payment. This large, lump-sum payment can be a surprise for borrowers who are not prepared or aware of this structure.
A borrower is a person or entity that has received a loan and is obligated to repay the amount borrowed, often with interest and other fees, according to the loan terms. The term is commonly used interchangeably with 'debtor.'
A co-borrower is an additional person who signs a mortgage loan agreement, sharing responsibility for loan repayment and contributing to the household income used to qualify for the loan.
A co-mortgagor is an individual who signs a mortgage contract along with other parties, making them jointly responsible for repaying the loan and often granting them part ownership in the encumbered property.
A co-signer is a person who signs a credit application alongside another individual, agreeing to be equally responsible for the repayment of the loan. This involves providing additional assurance to the lender that the loan will be repaid.
A Demand Loan is a type of loan that the lender can require to be repaid at any time, with often little to no advance warning to the borrower.
A Direct Reduction Mortgage is a type of fixed-rate mortgage where both interest and principal are repaid with each payment, ensuring that the loan is fully amortized over its term.
A due-on-sale clause is a provision in a mortgage agreement that requires the full repayment of the loan when the property is sold.
A fully amortized loan is a type of loan repayment structure where regular payments of both principal and interest are made over the course of the loan term, resulting in the total loan being paid off by the end of the term.
A Ginnie Mae Pass Through is a pass-through certificate secured by a pool of mortgage loans insured by the Government National Mortgage Association (Ginnie Mae), an arm of the federal government. These securities often provide high yields with security to investors, though returns may be affected by the pattern of loan repayments on the mortgages in the pool.
A mathematically derived factor from compound interest functions indicating the level periodic payment required to fully pay off a $1.00 loan over a certain period.
Long-term financing, also known as permanent mortgage, involves a loan with a long repayment period, typically extending over several years or decades. This form of financing is commonly used for purchasing real estate or significant capital investments, and provides borrowers with stability and predictable payment schedules.
Maturity refers to the due date of a loan, bond, lease, or insurance policy when the principal amount or full sum is to be repaid or the agreement expires. It establishes the timeline over which periodic payments or interest accrues and is eventually repaid.
Mortgage Guarantee Insurance Company (MGIC) is a private institution that provides insurance to lenders, ensuring loan repayment in case of default or foreclosure by the borrower.
Mortgaged Property refers to real or personal property that has been pledged as security for the repayment of a loan. This secured asset is usually real estate property, where the borrower retains ownership while the lender holds a legal claim until the debt is repaid in full.
P&I, or Principal and Interest, payments refer to the periodic payments made on a mortgage or loan that include both the loan principal and the interest accrued. These payments are common in various types of loans, including mortgages, auto loans, and personal loans.
A self-amortizing mortgage, also known as a fully amortizing mortgage, is one that retires itself through regular principal and interest payments over the life of the loan. At the end of the term, the loan balance reaches zero, meaning it is completely paid off.
