Home Buyer and House Plan Terms and Definitions - Part IV
Fixed Rate Mortgage - A mortgage whose interest rate remains constant over the life of the loan. The payments are not necessarily level. (See Graduated Payment Mortgage and Growing Equity Mortgage).
Fixed Schedule Mortgage - A mortgage whose payment schedule for the life of the loan is established at closing. The payments and interest rate are not necessarily level.
Graduated Payment Mortgage (GPM) - A fixed-rate, fixed-schedule loan which starts with lower payments than a level payment loan; the payments rise annually over the first 5 to 10 years and then remain constant for the remainder of the loan. GPMs involve negative amortization.
Growing Equity Mortgage (Rapid Payoff Mortgage) - A fixed-rate, fixed-schedule loan which starts with the same payments as a level payment loan; the payments rise annually, with the entire increase being used to reduce the outstanding balance. No negative amortization occurs, and the increase in payments may enable the borrower to pay off a 30-year loan in 15 to 20 years, or less.
Hazard Insurance - Protection against damage caused by fire, windstorm, or other common hazards. Many lenders require borrowers to carry it in an amount at least equal to the mortgage.
Housing Finance Agency - A state agency which offers a limited amount of below-market-rate home financing for low-and moderate-income households.
Index - The interest rate or adjustment standard which determines the changes in monthly payments for an adjustable rate loan.
Infrastructure - The public facilities and services needed to support residential development, including highways, bridges, schools, and sewer and water systems
Interest - The cost paid to a lender for the use of borrowed money.
Joint Tenancy - A form of ownership by which the tenants own a property equally. If one dies, the other would automatically inherit the entire property.
Level Payment Mortgage - A mortgage whose payments are identical for each month over the life of the loan.
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