The subject of refinancing mortgage involves lot of complicated terms and expressions, which require professional knowledge to understand them in-depth. If you are planning to do refinancing mortgage then you must understand and properly interpret the meaning behind various complex terminologies. Following are some important concepts which will help you to understand more easily;
• ARM: It is Adjustable Rate Mortgage where interest rate remains fixed only during initial period, but varies according to financial market movement or changes according to index rate.
• APP: This is Additional Principal Payment made by borrower which is more than his scheduled principal amount. It helps in reducing the major part of the remaining loan on borrower.
• APR: It stands for Annual Percentage Rate which is nothing but interest rate representing real cost of mortgage which is expressed in an annual form.
• Acceleration: It is the right of the lender to ask for instant repayment of mortgage loan to the defaulter. Lender can enforce acceleration on borrower according to the due on sale clause.
• Bridge financing: It is short term loan which used in fastening the gap between termination of one loan and the initiation of another loan. The loan type is often referred as a bridge loan.
• Credit Report: It is a report summarizing the credit history of an individual. It involves details of one’s public record and credit worthiness which can be used for future loan dealings.
• Foreclosure: It is the legal process in which borrower’s property that is mortgaged as a security for getting loan may be confiscated and sold in order to recover the loan amount.
• Delinquency cycle: It is the time span between first mortgage payment and the foreclosure done by the lender. This is a crucial time to take an action by contacting your bank and repaying the default installment.
• Forbearance: It is the facility given by lender to defer or postpone the payment during your hardship period. This may increase burden on borrower in the form of extra interest and over time deferred payments.
• Escrow: It is money or document which is deposited with a third party and must be returned on fulfillment of condition. Lender mainly collects this in the form of funds to pay your insurance premiums and taxes when they become due.
The topic of refinancing mortgage involves large number of technical terms and wrongly interpreting them may lead you to financial havoc. So by analyzing above expressions and properly understanding them, you can make your refinancing mortgage process trouble free. This will really help you in reading your mortgage documents bringing in more transparency and professionalism in the entire procedure.
