When I work with clients to help them buy and sell homes in Silicon Valley, one of my jobs is always that of translator. Real estate has its own language and terminology, much of which most individuals don’t readily understand. In addition to unfamiliar terms, the real estate field is also full of words we’ve all grown up knowing but which have different meanings when used in the buying and selling of property. If you’re involved in a real estate transaction, you’ll enjoy this post of commonly used words and phrases. If you’re not involved in a transaction, it still won’t hurt to add these meanings to your internal dictionary for when the time comes that you are. (An example of an "amortization schedule" is shown at the right.)
This is a section within your mortgage agreement that allows the lender (typically a bank or other financial institution) to demand that whatever amount of the loan is outstanding be paid immediately. Typically this clause involves a loan that has been defaulted or cases where the lender wasn’t made aware of a transfer of the loan or title to another person.
Sometimes abbreviated ARM, adjustable-rate mortgages feature interest rates that are subject to change based on fluctuations in an index. The extent of the fluctuations can’t be accurately predicted over the life of a loan, which is why some people prefer to go with a fixed-rate mortgage, where the interest rate remains the same until the loan is paid off.
The date on which ARM interest rates change.
The process of paying off a loan. In the early stages of a mortgage, a larger portion of the monthly payment will go toward accruing interest than toward the principle. As time passes and the balance decreases, smaller portions of the payment will pay the interest and larger portions will pay the principal.
This schedule keeps you from having to do the math yourself. It shows you the percentage of each payment that is applied toward both interest and principle over the course of the loan. It also lets you see the decrease of the balance of the loan until it is paid off.
The mortgage application, commonly called just the “application.” You use this form to communicate to the lender information such as your income, assets, debts, savings and other data necessary to process a loan.
The appraised value of a home isn’t necessarily the same as the asking price – or the final sale price. A property’s appraised value is an appraiser’s determination of fair market value. The dollar figure given is based on a variety of factors including the experience and understanding of the appraiser and an analysis of the property including its sale history.
A property’s increase in value due to factors such as market condition changes and inflation.
This is different from appraised value. Assessed value is the tax assessor’s value given to a property for taxation purposes. Don’t confuse these two types of values.
Assumption occurs when the seller’s current mortgage is assumed by the buyer.
Watch for other real estate terminology posts in the future!