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Financing/Loan Terminology

 

 


Loan terminology for understanding

Apply for the right mortgage or home refinance loan. Debt consolidation loans available below.
Your credit history is: Mortgage/Refinance mainly for use by people with:
Excellent - None poor or no credit history, other credit welcome.
Excellent - Poor poor credit history, other credit welcome.
Excellent - Average average to excellent credit history.
Excellent - Good good to excellent credit history.
Excellent excellent credit history.
Full credit range Loans tailored to credit history.
Appraisal
An evaluation of what a particular property in question is worth at a specific time or date.
APR
Acronym for “Annual Percentage Rate”. A yearly rate of interest on a loan.
Balloon Note
An amount left over after the term of the loan is past. The amount still owed on the property bought—a lump sum of money owed at the end of a loan.
Bankruptcy
A legal ruling where a person is said to be so far in debt that they cannot possibly cover their own existing loans nor can they earn enough to keep up with the payments. Whatever property that has a lien on it is then taken by the creditors (repossession or foreclosure) and usually sold to help recover the loss of what would have normally been paid by the person taking on the debt.
Base Price
The cost of a car with only the standard equipment, factory warranty, and destination charge.
Credit
Your history of handling financial obligations and banking accounts.
Deed
A document that names you as the legal holder of the property in question.
Equity
The value of your property minus the debt owed for it.
Foreclosure
Bank or lender takes possession of your property used as collateral due to non-payment of a previously secured loan.
Gross Income
The total amount that you earn at your place of employment. If self-employed, the amount left over after your expenses are subtracted from total brought in via your business.
Home Equity Line
of Credit
The amount determined by the lending institution that can be borrowed against your current home minus the balance owed for the home.
Home Equity Loan
A loan taken out that is usually in the amount equal to or less than the amount of the home's worth minus the first mortgage amount still owed on the house. The lender then becomes temporary part owner of the home until the equity loan is paid off. Equity loans are tax deductible which is favorable and recommended over a regular loan taken out directly for some purchase such as a car or other type of major debt.
Interest Rate
The percentage of a sum of money charged for its use.
Lien
The act by which a creditor obtains the rights to hold onto or sell property owned by the person in the event that the person lending money defaults on his/her loan payment agreements.
Lock (locked) or Lock In
A guaranteed period of time where the APR of a loan is kept at the rate promised by the bank or lender until the loan is secured by the person taking the loan.
Manufacturer's Rebate
Money offered towards the cost of a car that comes from the auto manufacturer. An incentive used to move slow selling cars or cars that are to be soon replaced by next year's model.
Monroney Sticker Price
A federal law requirement that the price that applies to the specified car be labeled as having a described cost and applied to the car window. It shows the base price, the manufacturer's installed options, fuel efficiency, the manufacturer's suggested retail price (MSRP), destination charge (the cost to ship from the manufacturer's location to dealership).
Mortgage
The act of trading the home to the lending institution to secure a home loan. Once the loan is completely paid back, the lender is to release the home back to the person taking out the loan. Usually this is accomplished with the lender returning the deed to the house.
Mortgagee
The person taking the mortgage and making payments with interest.
Mortgagor
Legal lender that finances property.
Refinance
To finance again under a new agreement which is usually for a lower interest charge (or APR).
Term
Indicates the period of time that it will take to pay off the loan and is usually expressed in months or years of time. Car loans generally fall into 24, 36, 48, and 60 month periods.
Title
A legal document that states that you have the right of ownership of a car.
Trade-in Value
The amount a dealership evaluates as to your car's worth. That amount is then subtracted from the total cost of the replacement car or truck and covers partial or full payment for that vehicle.
Underwriting
Processing the paperwork and verifying your credit history for the purpose of approving your loan.
Upfront Costs
Fees collected when a loan is processed and generally approved. Sometimes the fees reduce the amount of interest paid such as when you pay points on a mortgage, etc.
Upside-down
When the value of a vehicle is lower than the outstanding balance of the loan secured by the vehicle.
Waive
To give up a claim or right voluntarily.
Waiver
The act of signing a legal document to release an entity from legal obligations or charges.

Mortgage Sense

It's a good idea to refinance your home when the APR offered is at least 1.5% lower than what your current home mortgage APR is. If there are 2 or more closing points attached to the loan, then a 2% difference is preferable (i.e. if your current home loan is at 8.375%, you would want to find a loan at 6.375% or less if there are 2 or more points for closing). You can pay off the points up front or roll them into your loan. Don't forget to report the points on your IRS tax filing—they are deductible.

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