Glossary of Mortgage Terms

Property tax is a fee that local governments charge you every year for the real estate you own. The amount you pay is based on the assessed value of your property and the tax rate in your area. The money goes to schools, roads, and other public services.

A purchase money mortgage is when the seller lends money to the buyer to pay for part or all of the sale. The buyer then pays the seller directly.

A qualified mortgage is a home loan that meets federal standards for responsible lending. These standards include limits on fees, a ban on risky loan features, and a check of the borrower's ability to repay.

A rate-and-term refinance gives you a new loan with a different interest rate, repayment term, or both, but it doesn't change the amount you owe.

A real estate investment trust (REIT) is a business that owns, runs, or finances real estate that makes money and gives most of its taxable income to shareholders as dividends.

A real estate notary is a licensed professional who witnesses and verifies the signing of mortgage and property documents at closing, helping protect both buyers and lenders from fraud.

A real estate purchase agreement is a legally binding contract between a buyer and seller that spells out the price, terms, contingencies, and timeline for transferring ownership of a home.

Real estate valuation is the process of figuring out how much a home is worth by looking at its features, location, condition, and the prices of similar homes that have sold in the area.

A mortgage recast is when a homeowner makes a one-time payment toward the loan's principal balance. The lender then re-amortizes the remaining balance so that the monthly payments are lower, but the interest rate and loan term stay the same.

The month when your total savings from a lower mortgage payment equal the closing costs you paid to refinance is the break-even point.