Mortgage Glossary - H to O


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- B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W - X - Y - Z

- H -
HAZARD INSURANCE: Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards.

HOMEOWNER'S INSURANCE: An insurance policy that combines personal liability coverage and hazard insurance coverage for a dwelling and its contents.

HOMEOWNER'S WARRANTY: A type insurance that covers repairs to specified parts of a house for a specific period of time. It is provided by the builder or property seller as a condition of the sale.

HUD-1 STATEMENT: See SETTLEMENT STATEMENT.

- I -
INSURANCE BINDER: A document issued by an Insurance Company evidencing that appropriate property insurance has been obtained.

INTEREST: The fee charged for borrowing money.

INTEREST RATE CAP: A provision of an ARM limiting how much interest rates may increase per adjustment period or over the life of a mortgage. See also LIFETIME CAP.

- J -
JOINT TENANCY: A form of co-ownership giving each tenant equal interest and equal interest, and equal rights in the property' including the right of survivorship.

- L -
LATE CHARGE: The penalty a borrower may pay when a payment is made after the due date.

LEASE-PURCHASE MORTGAGE LOAN: A mortgage product that allows low-and moderate-income home buyers to lease a home from a non-profit organization with an option to buy. Each month's rent payment consists of principle, interest, taxes and insurance (PITI) payments on the first mortgage, plus an extra amount that is earmarked for deposit to a savings account in which money for a down payment will accumulate.

LIEN: A legal claim against a property that must be paid off when the property is sold.

LIFETIME CAP: A provision of an ARM that limits the total increase in interest rates over the life of the loan.

LOAN COMMITMENT: See COMMITMENT LETTER.

LOAN-TO-VALUE PERCENTAGE: The relationship between the unpaid principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property.

LOCK-IN: A written agreement guaranteeing the home buyer a specified interest rate provided the loan is closed within a set period of time. The lock-in also usually specifies the number of points to be paid at closing.

- M -
MORTGAGE: A legal document that pledges a property to the lender as security for payment of a debt.

MORTGAGE BANKER: A company that originates mortgages exclusively for resale in the secondary market.

MORTGAGE BROKER: An individual or company that for a fee acts as intermediary between borrowers and lenders.

MORTGAGE INSURANCE: See PRIVATE MORTGAGE INSURANCE

MORTGAGE INSURANCE PREMIUM: The fee paid by a borrower to the FHA or a private insurer for mortgage insurance.

MORTGAGE MARGIN: The set percentage the lender adds to the index value to determine the interest rate of an ARM.

MORTGAGE NOTE: A legal document obligating a borrower to repay a loan at a stated interest rate during a specified period of time: the mortgage note is secured by a mortgage.

MORTGAGEE INTEREST RATE: The rate of interest in effect for the monthly payment due.

MORTGAGEE: The lender in a mortgage agreement.

MORTGAGOR: The borrower in a mortgage agreement.

- N -
NEGATIVE AMORTIZATION: A gradual increase in the mortgage debt that occurs when the monthly payment is not large enough to cover the entire amount of principal and interest due. The amount of the shortfall is added to the unpaid principal balance, which results in "negative" amortization.

NOTICE OF DEFAULT: A formal written notice to a borrower that a default has occurred and that legal action may be taken.

- O -
ORIGINATION FEE: A fee paid to a lender for processing a loan application; it is stated as a percentage of the mortgage amount.

OWNER FINANCING: A property purchase transaction in which the property seller provides all or part of the financing.