Terms P-Z Payment Adjustment Period This is the time frame between payment adjustments made on Adjustable Rate Mortgages and a usual time frame is one, three, or five years. back Payment Cap A cap placed on the borrower's payment rather than his interest rate. The level to which the monthly payment may rise is limited to a certain dollar figure. A typical payment cap used today would be 7.5% of the payment (Roughly equivalent to one percent in interest). back Payment Rate The effective rate of interest the buyer is paying at a certain time, regardless of the overall interest rate of the note. back Permanent Buydown An amount of money a lender is paid to permanently reduce a borrower's interest rate and payments. back Permanent Loan A long-term mortgage of ten years or more, often registered after construction is complete. Often referred to as an "end loan". back P.I.T.I. This stands for principal, interest, taxes and insurance. It is representative of the borrower's actual monthly mortgage-related expenses. Most residential mortgage payments are referred to as P.I.T.I . back Pledged Account Buydown This refers to a principle amount paid plus interest earned on the principal to reduce a borrower's interest rate and payment. back Points A one - time fee you pay the bank for originating a loan. A charge equal to 1% of the loan amount which increases or equalizes the lender's yield or rate of return. Lenders offer various rate/point combinations. back Prepayment Penalty A penalty that a lender may impose on a borrower who pays off a loan before it is due. back Prepayment Privilege The right of a borrower to pay off all or part of the outstanding principal before the maturity date, without incurring a penalty. back Principal It is the amount of the mortgage debt that is presently owed and remains unpaid. The principal is the part of the monthly payment that reduces the remaining balance of a mortgage. back Private Mortgage Insurance Private mortgage insurance is to protect lenders against foreclosure losses provides mortgage insurance. Similar to the FHA's mortgage insurance premium, it is provided to lenders making conventional loans with less than 20% down. It protects lenders against foreclosure losses. back Prorate The seller and buyer allocate their proportionate share of an obligation paid or due. For example, real property taxes, fire insurance or condominium fees may be prorated. back Quit Claim Deed A document that releases the deeding or giving up of one's interest in a property to another party. back Rapid Payoff Mortgage (RPM) Another name for a short term mortgage. back Realtor A professional real estate broke or associate who is an active member in a local real estate board that is affiliated with the National Association of Realtors. Not every broker is a Realtor back Real Estate Mortgage Investment Conduits (REMICs) Mortgage securities may be pooled to create collateral for a more complex type of mortgage security known as a Real Estate Mortgage Investment Conduit. They are a complex type of mortgage securities that may be pooled to allow cash flows to be split so that different classes of securities may be created. back Real Estate Professional Any real estate broker, sales person, or attorney who holds a real estate license. back Refinance To obtain or replace an existing mortgage with a new mortgage loan on property already owned. New mortgage may have different terms than the old one. back Release of Liability A release from financial obligations from a mortgage due to another individual becoming responsible for the obligation. Both the VA and FHA allow releases of liability on their mortgages. back Renegotiable Rate Mortgage (RRM) Similar to an Adjustable Rate Mortgage, this type of mortgage allows the interest rates and payments to be adjusted periodically according to an index. back REO (Real Estate Owned) Defined as a term for properties taken back by lenders in foreclosures. back Residual Income Residual income is determined by subtracting all known obligations from the borrower's gross monthly income to see how much is left to support the family. This amount replaces the Income Ratio on VA loans. back Restriction A provision in a deed which limits in some way the right to use land or convey it's title. Examples are building setback lines and limitations to residential uses. back Reverse Annuity Mortgage (RAM) A type of mortgage where the property's equity serves as security for periodic payments made by the lender to the borrower. Mortgage is generally paid out upon the sale of the property. back Rollover Mortgage (ROM) A mortgage where the payments are only guaranteed for three, four, or five years. The borrower is allowed to refinance at the end of the term at the interest rate then applicable. back Savings and Loans The traditional lenders for conventional home loans. back Second Mortgage A mortgage loan that is registered on title after a first mortgage is already recorded. It is behind the first mortgage in priority. In the event of default and sale of the property, the second mortgagee will only be paid if there are funds left after the payment of the first mortgagee. back Secondary Mortgage Market A market where the primary lenders can sell packaged home loans to obtain more funds to make additional loans. back Shared Appreciation Mortgage (SAM) It is a loan arrangement where two or more parties participate in the purchase of real estate and share the appreciation and tax deduction. Similar to shared equity mortgages. back Shopping Center A group of stores catering to a trade area, which offer a variety of goods and/or service and on-site parking. back Strip Commercial It refers to a string of stores in a commercial area with no central leasing, management or theme. back Sweat Equity When a purchaser contributes to the construction or rehabilitation of a property in the form of labor or services rather than cash. back Swing Loan See Bridge Loan back Telecommuting Working at a remote location instead of traveling to the primary workplace. back Title A legal document evidencing proof of ownership. back Title Company A corporation which is in the business of selling policies of insurance guaranteeing the ownership, quality of title to land and also to perform escrow functions. back Title Insurance Protection for the lender (lender's policy) against the consequences of a pre-existing lien or the buyer (owner’s policy) against encumbrance on a property that is discovered after change of ownership. back Usury Extremely high interest charged, in excess of the legal rate established by law. back Vesting Conveying ownership or control of through legal action. back Veterans' Administration Loans Mortgage loans to veterans by banks, savings and loans, or other lenders that are guaranteed by the Veterans' Administration, enabling veterans to buy a residence with little or no money down. back Walk-Up Apartments Three to five story buildings, without an elevator. They may be mixed single and multi-family; usually only two or three different types of units. back Warehouse/Distribution Typically warehouse and distribution facilities are often located in the lowest-priced land in older parts of town or as well as suburban fringes. Frequently, like light industrial/assembly property, office use is limited to management tasks for distribution or warehouse facility, or about 15 percent of total space. back Warehouse Fee Charged as an offset to cover a loss, many mortgage firms borrow funds on a short-term basis in order to originate loans that will later be sold in the secondary mortgage market. When the rate of interest is higher on short-term loans than on long term mortgage loans, the lender has an economic loss. back Wraparound Mortgage A secondary financing option in which a new larger mortgage is created to encompass the first mortgage. This large second mortgage is used to preserve the low interest rate on the first mortgage for a potential buyer. back Yield A profit obtained on an investment, which includes the interest rate charged, discount points paid and any other charges collected. back