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Refinance Glossary

Adjustable Rate Mortgage (ARM)
An Adjustable Rate Mortgage is a common mortgage loan with a varying interest rate that adjusts on a periodic basis (typically every three years or annually after the fifth year), which alters the monthly payment due.

Annual Percentage Rate (APR)
This is the total cost of your mortgage payments every year (including all interest, points and fees) expressed as a percentage of the loan.

First Mortgage
The first mortgage is the primary mortgage on a property. When a property has multiple mortgages on it, the lender with the first mortgage is the one paid first.

Fixed Rate Mortgage
This is a mortgage whose interest rate never changes. The rate is fixed at the time of the loan approval.

Home Equity Line of Credit (HELOC)
The HELOC is a rotating line of credit given to a borrower allowing him to use the equity in his home as collateral. It is repaid with interest over time.

Home Equity Loan
A loan secured by a primary residence or second home to the extent of the excess of fair market value over the debt incurred in the purchase.

Loan to Value Ratio
This is the difference between the remaining balance of your loan and the value of your home.

Points are the fees you pay at the time of closing to reduce the loan's interest rate. One point equals 1% of the loan value.

Prepayment Penalty
This is a penalty that a borrower must pay if his loan is refinanced early or paid off early. Typically the penalty expires after a certain number of payments are made.

Refinance / Refinancing
"Refi" or refinancing is the process of paying off previous mortgages by getting a single loan with a much lower interest rate.

Second Mortgage
This is a mortgage more commonly referred to as a home equity loan.

General Disclaimer: The articles on this website are for informational purposes only and should not be used as a substitute for legal advice.

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