Many people find the mortgage process to be overwhelming, but it doesn’t have to be. Whether you are looking for a new mortgage or looking to relive your mortgage debts through a loan modification, knowing the key terms associated with a mortgage can help you get the best deal possible.
Amortization Schedule—is the time it takes to fully pay out the loan and reach a zero balance. Since the mortgage loan also includes fees and interest, only a small portion of the monthly payment goes towards the principal amount owed on the loan for the first half of the loan. In general, the longer the amortization schedule, the lower the monthly mortgage payments. Therefore, the longer your loan term, the slower the amortization and longer it will take to repay the loan debt.
Deed Of Trust—is a document that is signed during the mortgage closing process that gives the property as security for the loan. In other words, the deed of trust gives the lender the right to take the house and enter foreclosure if you default on the loan.
Deed In Lieu—is a foreclosure alternative that allows you to resolve your debts by signing over the deed to the lender. The lender will take possession and ownership rights to the property in exchange for absolving you of your mortgage debts. This should be a last resort option and only pursued after other foreclosure alternatives have been tried.
Forbearance—is an agreement between you and lender in which the lender agrees to refrain from pursuing a foreclosure while you get caught up on your mortgage debts. Typically, the lender will allow for a temporary mortgage modification to take place, whereby you can obtain a reduced monthly payment or suspension of interest on the loan.
Market Value—is the highest price your home could get as set by the current housing market conditions. The market value is important in short sale proceedings, in which you are selling the home for less than market value in order to obtain a quick offer to present to the lender in exchange for absolving you of your mortgage debts.
Principal—is the amount of the loan, excluding interest. The principal amount owed is the original balance of the loan for the purchase of the home, excluding interest; as well as referring to the current remaining balance of the loan excluding interest. The principal amount is important in mortgage modifications, in which you may be able to negotiate a reduction in the loan amount owed.