Mortgage

If your lender charges 1.5 mortgage points on a house selling for $100,000, on which there is a $90,000 loan, the points will cost you ____.

$1,350

Fixed Rate Mortgage

A mortgage in which the interest rate does not change during the entire term of the loan.

Mortgage points

Fees (one point equals 1 percent of the amount borrowed) charged by lenders at the time they grant a mortgage loan; they are related to the lender's supply of loanable funds and the demand for mortgages.

Negative Amortization

Occurs when the loan payment is not sufficient to cover the interest cost and results in the unpaid interest being added to the original balance, causing the loan amount to increase.

negative equity

The situation where a mortgage loan is bigger than the value of the property.

The majority of each monthly payment at the beginning of the loan goes to pay the

interest

A lender will usually require a loan-to-value ratio of 80% or less for a borrower to avoid

paying for private mortgage insurance (PMI)

If a house is purchased fives years ago for $100,00 and the value appreciates by 6% annually

the house is now worth $133,823

Earnest Money

the sum of money the home buyer pledges with the seller to indicate the intent of purchase

If a couple has a home valued at $96,000 with an outstanding mortgage of $60,000 and their lender is willing to provide a home equity loan of up to 75% of the equity value of the home

then they can borrow $27,000

escrow account

used to collect real estate taxes from one's monthly mortgage payment