Refinancing Your Mortgage? Know the lingo

By Greg Mischio -

If the saying "familiarity breeds success" holds true, it would be in your best interest, if you're looking for a mortgage refinance, to understand the terminology. There's no need to pour over dry-as-dust mortgage textbooks. Learn a few basic terms, and you'll be headed in the right direction.

Adjustable-rate mortgage:

A loan with a periodically changing interest rate. The mortgage rate is pegged to a specific economic indicator such as treasury bills or the prime interest rate, for example. Terms can vary greatly, and often offer very low introductory rates during the early years.


The Annual Percentage Rate (APR) is intended to include all of a lender's closing costs, giving a true yearly interest rate. However, many lenders calculate their APRs in different ways.

Fixed-rate mortgage:

A loan in which the rate is set at the time of closing and is constant throughout the mortgage term.

Good Faith Estimate:

Lenders are required by law to produce a Good Faith Estimate, which details all the costs you'll be charged to close your loan.

Loan-to-value (LTV) ratio:

The ratio of your loan amount to the appraised value of your home. (Loan amount/appraised value = Loan-to-value ratio.) Generally expressed as a percentage, a higher LTV can trigger the need for private mortgage insurance or a higher rate.


A point on a mortgage is 1 percent of the total loan value. For example, a point on a $100,000 mortgage is $1,000 (.01 X $100,000).


The length of time that you have to repay your mortgage loan. Generally expressed in years, the typical term for most mortgages is 15 to 30 years.

Third party fees:

Charged by vendors, such as appraisers and title companies, these are fees that your lender uses to assess the quality of your loan.

There are plenty of other commonly used mortgage terms, but these are the basics. Study up if you have time. Like any educational initiative, it's bound to pay off in the end.

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