Flashcards
Key Terms: Chapter 15- The Cost of Home Ownership
Cards in this deck (19)
- 1Adjustable rate mortgage (ARM)Rate of mortgage is lower than a fixed rate mortgage. Rates adjusted without refinancing. Caps available to limit how high rate can go for each adjustment period over term of loan.
- 2Amortization scheduleShows monthly payment to pay back loan at maturity. Payment also includes interest. Note payment is fixed at same amount each month.
- 3Amortization tableA table that shows each periodic payment on a loan or mortgage.
- 4Biweekly mortgageMortgage payments made every 2 weeks rather than monthly. This payment method takes years off the life of the mortgage and substantially reduces the cost of interest.
- 5Cash-out refinanceBorrowing more than the current mortgage and taking the difference out in cash.
- 6Closing costsCosts incurred when property passes from seller to buyer such as for credit reports, recording costs, points, and so on.
- 7Escrow accountLending institution requires that each month of the insurance cost and real estate taxes be kept in a special account.
- 8Fixed-rate mortgageMonthly payment fixed over number of years, usually 30 years.
- 9ForeclosureA legal process used by lender to recover balance of the loan from the borrower who has stopped making payments on the loan.
- 10Graduated-payment mortgage (GPM)Borrower pays less at beginning of mortgage. As years go on, the payments increase.
- 11Home equity line of creditA revolving line of credit secured by your home equity.
- 12Home equity loanA loan using the borrower’s home equity as collateral.
- 13Interest-only mortgageype of mortgage where in early years only interest payment is required.
- 14Monthly paymentAmount paid each period to pay off part of the mortgage.
- 15MortgageCost of home less down payment.
- 16PointsPercentage(s) of mortgage that represents an additional cost of borrowing. It is a one-time payment made at closing.
- 17Reverse mortgageFederal Housing Administration makes it possible for older homeowners to live in their homes and get cash or monthly income.
- 18Short saleIf property values decrease, homeowners may have to sell their properties for less than is owed.
- 19Subprime loanA loan with a rate higher than prime due to uncertainty of payment.