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Mortgage Glossary, E-K
The difference between the market value of the property and the owner's mortgage debt. It is expressed as a percentage of the total property cost. Equity indicates the portion of the property you already own.
A bank account established by the lender to set aside a portion of your monthly mortgage payment to cover annual charges for homeowner's insurance, mortgage insurance (if applicable), and property taxes.
FRM, Fixed Rate Mortgage
A type of mortgage loan where payments remain the same throughout the loan term because the interest rate is fixed. Mortgage Calculator works only with FRMs. To learn more about various types of mortgage loans, see ARM vs FRM on our website.
A legal process initiated when the borrower fails or refuses to pay the loan. This usually involves a forced sale of the property at a public auction. The money raised is used to pay off the mortgage debt.
An insurance that combines protection against direct damage to a dwelling and unforeseen events that may result in someone's injury or property damage.
A type of mortgage loan that combines fixed and adjustable interest rates. For example, a 7/1 ARM refers to a mortgage that has a fixed interest rate for the first 7 years and then becomes an adjustable rate mortgage.
A fee charged for the use of money.
The amount of interest that will be charged for a loan and is shown as a percentage of the loan amount. The nominal interest rate (the value specified in the mortgage agreement) is affected by discount points and by the interest compounding interval. Some banks charge interest more often than once a year – in this case the effective interest rate will be higher than the nominal interest rate.