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Mortgage Terms

(continued from Mortgage Terms A-F)...

Home Equity Line of Credit: A loan providing you with the ability to borrow funds at the time and in the amount you choose, up to a maximum credit limit for which you have qualified. Repayment is secured by the equity in your home. Simple interest (interest-only payments on the outstanding balance) is usually tax-deductible. Often used for home improvements, major purchases or expenses, and debt consolidation.

Home Equity Loan: A fixed or adjustable rate loan obtained for a variety of purposes, secured by the equity in your home. Interest paid is usually tax -deductible. Often used for home improvement or freeing of equity for investment in other real estate or investment. Recommended by many to replace or substitute for consumer loans whose interest is not tax-deductible, such as auto or boat loans, credit card debt, medical debt, and education loans.

Housing and Urban Development (HUD): A U.S. government agency established to implement federal housing and community development programs; oversees the Federal Housing Administration.

Index: A published rate used by lenders to calculate interest adjustments on ARMs (Index + Margin = Interest Rate). Some indexes are more volatile than others. Common indexes include the Cost of Funds for the Eleventh Federal District of banks or the average rate of a one year Government Treasury Security.

PITI(principal, interest, taxes, and insurance): These are items that are frequently included in the monthly mortgage payment to lenders. Some lenders may allow you to pay taxes and insurance yourself.

Point: A fee or charge equal to one percent (1%) of the principal amount of the loan which is collected by the lender at the time the loan is made. It is collected only once. Generally the lower the interest rate, the more points you'll pay.

Prequalification: The process of determining how much money a prospective homebuyer will be eligible to borrow prior to application for a loan.

Prime Rate: Lowest commercial interest rate charged by a bank on short-term loans to its most credit-worthy customers.

Variable Rate: An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly.

American Consumer Credit Counseling (ACCC) provides nonprofit credit counseling, financial education, debt relief consolidation and debt reduction services for consumers nationwide. We offer free credit counseling to help individuals and families learn how to pay down credit card debt and how to eliminate debt altogether. As an alternative to expensive unsecured debt consolidation programs for settling credit card debt, our debt management programs help consumers pay off debts and manage credit card debt more quickly by consolidating payments. We also offer debt negotiation services to help reduce finance charges and interest rates. And our financial education services show consumer how to manage money more effectively and how to get rid of credit card debt more quickly – usually in five years or less.

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