Mortgage Terms Defined

The dream to own real estate, in particular the family home, is in the heart of many. Beyond the dream of being handed a set of front door keys for the first time, how many of us really understand what a mortgage is all about. Not many. Like many industries, mortgages have a wide array of tech jargon that can be confusing to many consumers.

Not understanding a specific word can cost you thousands of dollars. Here's a list which includes some of the most common terms used in the mortgage and real estate industries.

Adjustable Rate Mortgage (ARM)
A mortgage in which the interest rate is adjusted periodically based on a pre-selected index.

Biweekly
A payment plan where the borrower pays half of their normal mortgage payment every other week (instead of once a month). Biweekly plans total 26 payments annually and each payment equals one half the normal monthly mortgage payment.

Fixed Rate Mortgage
The interest rate will remain the same (unless refinanced) throughout the term of the mortgage for the original borrower.

Interest Accrual Rate
The percentage rate at which interest accrues on your mortgage. In most cases, it is also the rate used to calculate your monthly payments.

Loan-to-Value (LTV) Ratio
The direct relationship between the amount of the mortgage loan and the appraised value of the property. The LTV ratio is expressed as a percentage.

Refinance
Obtaining a new mortgage loan on a property already owned (often to replace existing loans on the property with a lower interest rate).