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Mortgage Glossary, A-B
A scheme of repaying a mortgage loan, in which the monthly payment remains constant during the whole loan term, while its structure changes. The monthly payment consists of the interest portion and the principal portion. Over time, the interest portion decreases while the principal portion increases, so that the loan is paid off (amortized) in the specified time.
A table that shows the structure of each monthly payment over the loan term. A payment consists of the interest portion and the principal portion. An amortization schedule also shows the gradual decrease of the loan balance until it reaches zero.
It is used to submit important information about the borrower to the lender. Generally, it includes the following:
ARM (Adjustable Rate Mortgage)
A type of mortgage loan where the interest rate can change over time, depending on the current business environment. To learn more about various types of mortgage loans, see ARM vs FRM on our website.
The difference between the part of the principal still owed and the part you have already paid.
With this type of mortgage you make payments every two weeks instead of once a month. This means that you make thirteen biweekly payments during the year instead of twelve monthly payments. The extra payment reduces the principal, so that you can pay off your mortgage much more quickly. For example: you take a $100,000 loan at 7.8% for 30 years. Your monthly payment will be $720. If you switch to biweekly payment scheme, you will pay $360 every two weeks, which will save you 7 years and $43,750 of interest. To learn more about how to pay off your loan more quickly, see Prepayment on our website.
Binder or "offer to purchase"
An agreement between a buyer and a seller, which ensures the buyer's right to purchase real estate on agreed terms. It will be available for a limited period. The agreement is secured by payment of a sufficient sum of money to show that the buyer has a genuine interest in the purchase. If the buyer changes his mind or is unable to make the purchase, he forfeits this money unless the binder expressly states that the money can be refunded.
A person who has been approved to receive a loan.