Do mortgage terms trip you up? Refer to our mortgage glossary for clarification! Amortized Mortgage – A mortgage loan in which the principal, in addition to the interest payment is paid via periodic installments during the loan’s term. Appraisal – An expert’s opinion of a property’s market value. This term can also refer to the process by which this opinion of value is obtained. Appreciation – An increase in value of an asset such as a parcel of land or a building. Board Rate – A rate determined by an individual bank or lending institution that is generally benchmarked against interbank rates, market conditions and business costs. Board rates are generally considered less transparent compared SIBOR and SOR which are published benchmarks (see related definitions) and move in tandem with market conditions. Bridge Loan – Bridge loans are loans intended to be used for a short period of time between the initial requirement for funds and a permanent financial solution. In mortgage finance, bridge loans often serve as temporary financing for a portion of a new property before the proceeds from the sale of another property become available. Clawback – Gives the lender the right to demand repayment of certain subsidies provided to a borrower if a mortgage is fully repaid within a specified period of time. A clawback generally applies to legal fees and may include subsidies for valuation as well as fire insurance. Collateral Period – The period of time during which a lender has the right of clawback. Market practice in Singapore is for the clawback period to expire after 3 years. Collateral – A security for the repayment of a loan. In the case of real estate, a piece of property is collateral to ensure the borrower’s ability to repay what is owed. Conversion Fee – A fee charged by a lender to convert terms of existing loan. Typically a conversion fee will be charged when switching from a fixed interest rate to floating for vice versa. Conveyance – The transfer of property from one party to another. The document or instrument by which this is affected. Default – The failure, for whatever reason, to make a payment or fulfill a commitment. Down Payment – A borrower pays this amount in cash when purchasing a property. The down payment is a percentage of the value of property, and this amount is deducted from the amount of the loan. Due Diligence – The process of investigating the condition and legal status of assets. Equity – The difference between the market value of a property and the claims held against it. Equity Loan – A loan secured against the value of a property. Fixed Interest Rate – A rate of interest that remains constant for a predetermined amount of time and is not affected by changes in the market rate of interest. Floating Interest Rate – An interest rate that moves in tandem with market conditions or, in the case of a board rate of interest, at a bank’s discretion. Foreclosure – A proceeding in which the financer of a mortgage (lender) seeks to gain control of a property because the borrower has defaulted on payments. Freehold – An owner of freehold property owns the land and building in perpetuity. Guarantor - A person who pledges collateral for the contract of another or who guarantees the performance of another. Hypothecate – To give property as security without relinquishing ownership of said property. A mortgage is a good example of a hypothecation. Income Property – Property which produces income from rentals and profits. Installment Payment – The regular payments (usually monthly) due on a mortgage loan. This includes payment of both principal and interest. Also referred to as “Mortgage Payment”. Interest Offset Account – An interest bearing current account that is linked to a mortgage account. Interest earned on deposits held in the current account is offset against interest payable on the home loan. The purpose of this structure is to allow a borrower to reduce interest expenses while still maintaining full control over money deposited in the current account and generally appeals to consumers with excess cash. Interest Only Payment – Monthly mortgage payments fully comprised of interest costs. Because there is no payment of principal included, the loan amount remains constant, i.e. it is not reduced over time. Borrowers generally choose interest only payment if they want to manage their cash flow since monthly payment amounts are lower than with interest and principal repayment. Also, by leaving out the principal component, less money is invested into the property thereby increasing the return to an investor. Legal Fee – A fee charged by a lawyer for his services, e.g. in preparing legal documentation or advice. Letter of Intent – A non-binding agreement between parties involved in a contract to proceed with negotiations or complete a project. Letter of Offer – The legal agreement between the borrower and bank or lending institution. Lien - A charge upon property for the satisfaction or discharge of a debt. Loan Origination Fee – A loan origination fee is the fee charged by a broker for his expertise in knowing which lender is likely to fund a loan and offer the best terms and for his assistance in preparing the documents required to close the loan efficiently. Loan Originator - A loan originator is a broker who charges the service of locating borrowers and putting them together with an appropriate lender. Loan to Value Ratio – Shown as a percentage, this is the relationship between the mortgage loan and the appraised value of the property. Lock-In-Period – The period of during which a borrower incurs a penalty fee for early repayment of a loan. LTV - Loan to Value – The ratio of a loan amount against the value of the property being used as collateral. A property valued at $100,000 with a loan request against the asset of $50,000 would have a loan-to-value ratio of 50%. Market Price – The actual selling price of the property or land involved in a deal. Market Value – The written, estimated value obtained by factoring in location, assets, demand & supply. Estimates for market value are typically provided by professional valuers. Mortgage – A legal document that pledges a property to the lender as security for payment of a debt. Also referred to as a home or housing loan. Mortgage Broker – A broker is an intermediary who seeks to match borrowers with banks and finance companies, handles forms and documents, and manages the mortgage application process. Mortgage Reducing Term Assurance (MRTA) – Reducing term life insurance that pays the mortgage in case of death or permanent disability. Net Worth - Assets minus liabilities of a company or individual. Here, assets include cash. Also referred to as shareholders’ equity. Origination Fee – A fee that a broker charges for his work in arranging a mortgage loan and is independent from any additional compensation a bank might pay. A broker may charge an origination fee depending on the complexity of the transaction involved. Prepayment Penalty – A charge, usually given as a percentage that is listed in the terms of a loan. Pre-payment fees are common in lending because without them, the lender does not make the return on investment that was anticipated from interest payments. Principal - The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage. Principal Balance – The outstanding balance of principal on a mortgage not including interest or any other charges. Title - The ownership rights. Valuation – Estimated price or value of a property. This can be given by a professional valuer (appraiser) on an indicative or official basis. Variable Interest Rate – An interest rate that moves in tandem with market conditions or, in the case of a board rate of interest, at a bank’s discretion. Also referred to as a floating rate. smbmortgagebrokers.ph/mortgage-glossary/
Posted on: Mon, 01 Dec 2014 07:03:49 +0000
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