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Mortgage Glossary, P-Z
Principal, Interest, Taxes, and Insurance – are the four components of a monthly mortgage payment. Payments of principal and interest go directly towards repaying the loan while the portion that covers taxes and insurance (homeowner's and mortgage, if applicable) goes into an escrow account to cover the fees when they are due.
PMI, Private Mortgage Insurance
An insurance to protect the lender in case you default (fail to pay) your loan. It is similar to an insurance by a governmental agency, except that a private insurance company issues it. Generally, it is required for loans with LTV Ratio of over 80%.
See Discount point.
The process of determining how much money a prospective homebuyer will be eligible to borrow. At this stage a borrower's credit history is checked. A preapproved potential borrower has more chances to get a mortgage loan than a prequalified one.
A short informal interview with a possible lender who takes into account very basic information regarding your financial status and estimates the loan amount for which you may qualify. Prequalification is usually free of charge.
Paying off some of mortgage loan before the scheduled due date. In some mortgage contracts, a penalty may be charged for making a prepayment.
The amount of money you borrow. It does not include interest or additional fees.
Paying off one loan by obtaining another. Refinancing is generally done to get better loan terms, such as a lower interest rate.