Mortgage Glossary
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PACKAGE MORTGAGE:
A loan secured against both land and chattels.
PAPER:
Slang term for a loan note given instead of a cash payment.
PARTIAL DISCHARGE:
A document signed by the mortgagees holding a blanket mortgage registered on title to several properties which removes the mortgage from title to just one of the properties.
PARTIAL PAYMENT:
Any payment which is insufficient to meet the full amount required.
PARTIAL RELEASE:
A document signed by the mortgagees holding a blanket mortgage registered on title to several properties which removes the mortgage from title to just one of the properties.
PARTIALLY AMORTIZED MORTGAGE:
A very common form of mortgage in which the term is less than the amortization period such that, at the maturity date, the mortgage is not fully paid out and either refinancing or a large balloon payment is required.
PARTICIPATION (OR PARTICIPATING) MORTGAGE:
A mortgage in which the lender is entitled to a stated share of the income of the property or of sale proceeds.
PAY OUT:
To provide the lender with the total amount then required to retire a loan obligation.
PAYMENT ADJUSTMENT INTERVAL:
The period of time between changes in the amount of each periodic payment on a variable or adjustable rate mortgage.
PAYMENT CAP:
A term of some variable or adjustable rate mortgages in which the level to which the monthly payment may rise is limited to a certain dollar figure.
PAYMENT CHANGE DATE:
The date when the amount of each payment under an adjustable, variable or graduated payment mortgage changes.
PAYMENT DECREASE CAP:
A contractual limit on the amount of each periodic payment may drop at any one payment change date. Expressed as a percentage.
PAYMENT INCREASE CAP:
A contractual limit on the amount of each periodic payment may rise at any one payment change date. Expressed as a percentage.
PAYMENT PENALTY:
Also known as "prepayment penalty" or "early payment penalty", the fee paid by a borrower when she pays out some or all of the principal of a loan at a time when such a payment is not allowed under the terms of the loan.
PENALTY:
Fine for breaching a rule, term of a contract or law.
PERIODIC PAYMENT CAP:
See "payment cap".
PERIODIC RATE CAP:
See "rate cap".
PERMANENT LOAN/MORTGAGE:
A long-term mortgage, often registered after construction is complete and the property is occupied. Also known as "end loan."
PIPELINE RISK:
Slang term describing the possibility that a lender will lose money as a result of committing to a loan at a given interest rate only to see interest rates rise in the interim before the loan transaction is closed.
PLEDGED ACCOUNT MORTGAGE (PAM):
The payment of funds into a pledged account to be used to reduce mortgage payments at a later date.
PORTABLE MORTGAGE:
A mortgage which may be moved by the borrower in the event that the borrower sells her current property and buys a new one. "Porting" one's mortgage usually requires the consent of the lender.
POWER OF SALE:
Generally the fastest and cheapest mortgage enforcement method open to lenders. A common clause in a mortgage agreement which gives the lender the right to take over and sell the property to cure the borrower's default. The sale proceeds are allocated first to principal and interest, then to penalties, then to the lender's costs in exercising the power, then to other registered claimants and finally to the borrower if there is any left.
PRE-APPROVED MORTGAGE:
A commitment from a lender to provide a mortgage loan on stated terms to a borrower before the borrower has found a property to buy. The pre-approved mortgage allows the borrower to make a firm, cash offer on the property of choice.
PREARRANGED REFINANCING AGREEMENT:
An arrangement between lender and borrower in which the lender agrees to favorable terms for the borrower on a future refinance as an inducement to the borrower to place the original mortgage with the lender.
PRE-FORECLOSURE SALE:
The sale of a property by a delinquent borrower under an agreement with the lender. The sale may not produce enough proceeds to pay out the loan but the lender will save the costs of foreclosing and selling.
PREMIUM:
1. The periodic payment on a policy of insurance.
2. The value of a debt instrument in excess of it face value.
3. Of highest quality.
PREPAID INTEREST:
Charges for interest that are paid in advance of their accrual (i.e. point charges, etc.).
PREPAYMENT:
Payment of all or part of the principal of a mortgage or loan before it comes due.
PREPAYMENT CLAUSE:
A term in a mortgage that establishes the rules regarding extra payments toward principal.
PREPAYMENT PENALTY:
A fee charged to a borrower for paying out all or part of the principal of the mortgage or loan before it comes due.
PREPAYMENT PRIVILEGE:
The right of the borrower to pay out all or part of the outstanding principal before it comes due.
PRE-QUALIFICATION:
The act of going through the mortgage application process before the borrower is ready to borrow, to establish how much money the borrower could obtain under a loan.
PRICE-LEVEL-ADJUSTED MORTGAGE:
An adjustable or variable payment loan which uses the rate of inflation as an index.
PRIME RATE:
The best rate charged on loans, usually saved for the best clients of the lenders. May also be set by a national institution as a benchmark or index for other lenders.
PRINCIPAL:
1. The amount of money borrowed or still owed on a loan, without including interest.
2. The person on whose behalf an agent acts.
PRINCIPAL AND INTEREST PAYMENT (P&I):
A blended, periodic payment that is enough to pay off accumulated interest and a portion of the principal.
PRINCIPAL BALANCE:
The outstanding amount owing on a mortgage without including accumulated interest.
PRINCIPAL, INTEREST, TAXES AND INSURANCE (PITI):
The four parts of many periodic loan payments.
PRIVATE MORTGAGE:
A mortgage contract in which the lender is not a registered financial institution but may be a friend, family member or individual investor.
PRIVATE MORTGAGE INSURANCE (PMI):
A policy of insurance issued by a non-governmental entity which protects a lender against the default of the borrower.
PROGRESS PAYMENTS:
Loan advances issued to a builder as construction of a building moves forward.
PROMISSORY NOTE:
A document signifying an indebtedness.
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