There are several terms that are used in the mortgage business and these can be quite confusing for a person when he or she is approached by a mortgage company representative or when one talks to people in the mortgage business. Here an attempt is made to explain some of the commonly used terms in the mortgage business;

Principal: this is amount of money that is given in a loan by the lender (the mortgage company) to the borrower.

Interest: This is the interest rate that the lender will charge for providing the loan.

Term: This is the period in which the borrower pays back the principal and the interest to the lender in a series of installments.

Equity: This is the value of a person’s property less his or her debts. It also means a person’s financial worth. For example a person has a house that has a value of $ 200,000 and he has a mortgage balance of $ 120,000. His equity would be $ 200,000 - $ 120,000 = $ 80,000.

Bankruptcy: This means that the borrower is no longer able to repay their debts and declare that they are bankrupt.

Foreclosure: When the lender takes possession of a property because the borrower is not able to repay the mortgage.

LTV: Loan to Value Ratio this is amount of money that a person can borrow or which the lender is ready to give. If a persons equity is $ 80,000 and he wants to take a second mortgage for $ 50,000 the LTV would be = 50,000 x 100 / 80,000 = 62.5%.

FRM: Fixed Rate Mortgage in this the interest that the mortgage company will charge will not change during the entire term of the repayment.

ARM: Adjustable Rate Mortgage this is that a person takes a mortgage which is to be paid in 30 years and the interest is to be revised after a fixed term which may be 1, 3, 5, 7 years. This means that at the end of each term the borrower and the lender will fix the interest rate for the next period. The interest rate is based on the prevailing interest rate.

Lo-doc and no-doc: in USA a person who applies for a mortgage is required to provide certain documentation to prove their credit worthiness. Lo-doc means that a minimum of documentation needs to be provided by the borrower. The borrower may just need to provide copies of their tax returns and salary stubs. No-doc means that the borrower does not require providing any documentation to prove their credit worthiness. These are catch phrases that mortgage companies use to get clients.

Costs and Closing Costs: These are the charges that a mortgage company takes to provide a mortgage loan to the borrower.

Dictionary for home mortgage terms and mortgage terms glossary and mortgage term definitions are available on the Internet and there are a lot of books in which one can look up the meanings of the different terms that are used in the mortgage business and if one is looking for a mortgage it is a good idea to familiarize oneself with the mortgage loan terms and not be confused when talking with representatives of mortgage companies. As mortgage company employees also known as loan officers will use a whole lot of mortgage terms. Mortgages with 40 year terms should not be confused as a mortgage term as it simply means getting a mortgage which has to be paid over a period of 40 years. Commercial mortgage terms and adjustable mortgage rate terms have two different meanings. Commercial mortgage is applied where a business seeks to get a mortgage for use in any real estate related venture like construction of a hotel or a restaurant and adjustable rate mortgage means where the interest rate on a mortgage is revised after a fixed period. One must be familiar with long term mortgages on homes and should get a mortgage terms glossary to understand the jargon that is used in the mortgage business.