Common terms for a mortgage include the "creditor", the "debtor" and the "mortgage agent". Although it is obvious what these terms mean, homeowners may not be familiar with many other terms associated with mortgages. Let's take a look at some of them:

Creditor

A creditor is a financial institution that provides money, usually a bank. Sometimes, the creditor is referred to by the name "mortgagee" or "lender".

Debtor

The person or entity who owes the loan or mortgage loans in Nashville is called the debtor. They can also be called the mortgagor.

Multiple people may own a house. This could be a spouse and wife, two friends, or a child and their parent. In this case, the loan is taken out to both the borrower and the owner of the property.

Mortgage broker, financial advisor

Although mortgages can be difficult to find, they are available because of the high demand for housing in many countries. Mortgages may be offered by banks, credit unions, and Savings loans. Prospective debtors can use a mortgage broker to help them find the best mortgage with the lowest interest rate. The mortgage broker also acts as an agent for the mortgage lenders in Nashville to locate people who are willing to take these mortgages and to handle all paperwork.

A mortgage closing or obtaining a loan is often complicated by the involvement of other parties, such as lawyers and financial advisors. A financial advisor can help you understand your personal needs and long-term goals. They will also be able to give you the best advice about your loan requirements.

Foreclosure

If the debtor is unable to or unwilling to meet his financial obligations, the property may be foreclosed. This means that the creditor can seize the property to recover the remaining loan cost.

A home that has been foreclosed on will typically be sold at an auction. The sale price is applied to the outstanding mortgage amount. If the property sells for less than the outstanding mortgage balance, the debtor could still be responsible for the remainder.

Annual Percentage Rate (APR).

The APR refers to the interest rate on a loan plus any additional costs such as origination fees and premiums for mortgage insurance (if applicable). The APR would equal the interest rate if there were no fees involved in getting a loan.

Breakeven Point

The breakeven point refers to the time it takes to repay the mortgage loan costs. This is done by subtracting the closing costs of refinancing from the difference in the monthly payments.

ARM

This is an Adjustable Rate Mortgage, a mortgage that allows the lender to adjust its interest rates periodically.

Fixed-Rate Mortgage

A mortgage where the interest rate is fixed throughout the term.

Cap

Although ARMs can fluctuate in interest rates, those fluctuations are generally limited by law to a specific amount. These limitations can be applied to the amount of the loan that may adjust over 6 months, an annual period, or over the entire loan term. They are called "caps".

Index

An index is a number that is used to calculate the interest rate for an ARMM. An index is generally a published number, percentage, or figure that determines the interest rate for an ARM. For example, it may be the average yield or interest rate on U.S. Treasury bills. The index is adjusted to include a margin to determine the interest rate to be charged for the ARM.

Prime Rate

The interest rate charged by banks to their preferred customers. The prime rate is a measure of how much interest banks charge to their customers.

Equity

The homeowner's financial stake in the property or its value. Equity is the difference between the property's fair market value and its outstanding mortgage or other liens. If the value is higher, equity is equal to equity.

Home Equity Loan

Lenders that secured property, but were not secured by the equity of the property.

Amortization

A mortgage loan is paid off gradually by paying monthly principal and interest payments. The amortization table displays the total payment, divided by principal, interest, and the unpaid balance, for the entire loan term.

Refinance Cash-Out

A "cash-out refinance" is when a borrower refinances his loan at a higher amount than the current balance to pull out money for personal purposes.

Approved Value

A property's fair market price is a valuation based on the appraisal's experience, knowledge, and analysis. How much the home can be or will be mortgaged depends on how high the appraised value is.

Appreciation

An increase in property value due to market conditions, inflation, or other factors.

Depreciation

A decrease in property value; the opposite of appreciation. It is important to understand the concepts of appreciation and depreciation. The appraised value for a home determines the mortgage amount.

Lock-in

A contract in which the lender guarantees a specific interest rate for a given amount of time at a particular cost.

Lock-in Period

This is the time that the lender guarantees an interest rate to a borrower. This is different than a fixed-rate mortgage because the lock-in period may be shorter than the term of the loan.

We mentioned that many of these terms may be familiar to you, but it is worth reviewing them and seeing how they relate to your mortgage and the refinance process.

Now that you are familiar with the basics of a mortgage and the lending process let's talk about refinancing.