Mortgage Help

Amortization Schedule
The amortization schedule show you how monthly principal and interest payment and principal balances change over the life of your loan.
Balloon Term
The Balloon term is the length of time after which the remaining principal balance on your mortgage is due. Mortgages usually have a balloon term that is the same as the amortization term. Your final payment for those mortgage may be slightly different. Mortgages where the balloon term is shorter than the amortization term are called balloon mortgages. These typically result in a very large final required payment and, thus, are much riskier mortgages.
The break-even point is the amount of time it will take for your mortgage savings to equal the amount you paid up front. The break-even point for your refinance is the amount of time it will take for your refinance savings to equal the cost of your refinance. The break-even for paying discount points is the amount of time it will take for your savings to equal the amount you paid for points
Capital Gains Tax Exclusion
The capital gain from the sale of your main home that is not subject to capital gains tax. The maximum exclusion amount is generally determined by your tax filing status, but may be limited by other factors. In general, to qualify for the exclusion, you must meet both the ownership test and the use test.
Capital Gains Tax Rate
The capital gains tax rate is the rate at which your capital gains are taxed at. Your tax rate is determined by your income and other factors. Some or all of capital gains may not be subject to capital gains tax if the gain on the sale of your home is less than your capital gains exclusion amount.
Car Loan
The total monthly payments for any car loan(s) or lease(s) that you are obliged to pay.
Cash Out
The amount of money the borrower will receive after closing the loan. This is more common for refinances than for purchases.
Cash To Close
The amount of money, if any, that the borrower must bring to closing to close the loan. This is more common for purchases than for refinances.
Closing Costs
Fees paid at the closing of a real estate transaction. Closing costs may include discount points assessed in exchange for a lower interest rate; origination fees assessed to compensate the lender for evaluating, processing, and approving your mortgage; fees for third party services associated with acquiring the loan such as fees for the appraisal, credit report, title insurance and pest inspection; taxes and other government fees such as recording fees; prepaid expenses for items like homeowner's insurance, mortgage insurance, property taxes and prepaid interest; your initial escrow payment; and other fees such as homeowners' association dues. In some cases the seller and/or the lender may pay for a portion of the closing costs in exchange for a higher purchase price or higher loan amount or interest rate.
Combined Loan-To-Value Ratio
The Combined Loan-To-Value (CLTV) ratio is one of the ways lenders measure risk. It considers all liens on your property, including, but not limited to your first mortgage, second mortgage, tax liens, and mechanics liens.
Credit Card
The total of the minimum monthly payments you are required to make on your credit cards. You should not include credit card balances that you pay off in full every month.
Credit Report
Your credit report contains detailed history of your use of credit. It includes information concerning any mortgage, loans or credit cards and their payment histories, public records like bankruptcies or judgments and collections. In addition to late payments and other adverse items, the amount of credit, recency and number of credit inquiries and how much of your revolving credit you are utilizing can have an impact.
Credit Score
A number used by lenders to measure the credit risk they would take by loaning money to you. Credit scores can be computed and measure different ways. The most common for mortgages is the FICO score. Higher FICO scores mean lower risk and will help qualify borrowers for better loans at lower interest rates. It is common for lenders to use the middle score of the three provided from the major credit bureaus.
Debt-To-Income Ratio
Your debt-to-income ratio may be used to determine: the loan programs that you qualify for; the maximum mortgage amount you qualify for; and how much you can can afford to pay for a home. It is an important measure of risk used by mortgage lenders. One common type of debt-to-income ratio excludes your mortgage payment from calculation. Another includes your prospective mortgage payment along with all other required debt payments. The ratio used by the affordability calculator includes recurring payments on your debt and your housing payment, including principal, interest, taxes, hazard insurance, mortgage insurance and homeowners association dues. It is generally limited to 36% for conventional loans and 43% for FHA loans. These guidelines are subject to change. Also, some lenders may consider compensating factors in allowing higher debt-to-income ratios.
Discount Points
Borrowers may be given the option of paying discount points on their mortgage in exchange for a lower mortgage interest rate. Each discount point is equal to one percent (1%) of the mortgage loan amount. For example, if your mortgage loan amount is $250,000, one point would cost you $2,500 in additional closing costs ($250,000*.01).
Discretionary Income
The amount of money left over from your income after you pay your current taxes, and essential expenses necessary to maintain a reasonable standard of living, such as your food, mortgage, rent, utilities, insurance, clothing, transportation, maintenance, child support and sundries.
Down Payment
The amount you can comfortably spend up-front when buying your new home to make up the difference between the purchase price of the home and your mortgage amount. Lenders may require that you have at least a minimum amount of cash reserves after making the down payment.
Emergency Savings
Money you can use to pay for your expenses if you have an unexpected loss of income and/or increased expenses. Savings that covers 6-12 months expenses is a good start.
The equity you have in your home is the difference between the value of your home and the sum of the liens on your home, including mortgages lien. On a home purchase, your initial equity is usually equal to your down payment. If you are refinancing, your equity is often equal to the appraised value of your home minus the proposed loan amount for your refinanced mortgage.
Extra Payment
The amount of additional principal that you plan to add to your mortgage payment. To get the financial benefit of paying down your principal balance early, direct your mortgage servicer to use the extra payment to pay down the mortgage balance immediately rather than giving you a credit towards your next scheduled payment. Some loans restrict how fast you can pay off your loan and may even have prepayment penalties. Refer to your mortgage documents, including the prepayment penalty rider, if any, to determine if this applies to you. You should also check with your mortgage servicer to make sure that extra payments you make do not trigger a prepayment penalty.
Extra Payment End
The number of months from now that you plan to make your last extra payment of principal.
Extra Payment Frequency
The frequency is how often you plan on making extra payments of principal. Some homeowners add an extra payment of principal to their mortgage payment every month. Others may choose to pay extra principal on a quarterly, semi-annual, annual or one-time basis to better match the times when they have more cash available. For example, borrowers who receive a regular bonus or tax refund may wish to use them to pay down the principal balance of their mortgage.
Extra Payment Start
The number of months from now that you plan to make your first extra payment of principal.
The credit score most lenders use. Lenders generally use the scores from each of the three major credit bureaus: Equifax, Experian and TransUnion. The bureaus each have a different name for their FICO scores, but they are developed using the same methods by Fair Issac. Bureaus refer to their scores as follows: Equifax - Beacon, Experian - Experian/Fair Isaac Risk Model and TransUnion - EMPIRICA.
First Mortgage Balance
The current principal balance of your first mortgage. At the time you buy a home this is the first mortgage loan amount.
Fixed Rate Mortgage
A mortgage that has an interest rate that does not change.
Floor Rate
Floor rate is the minimum interest rate for an adjustable rate mortgage (ARM).
HOA Dues
Your Homeowners Association dues, if any, will be included in calculating your debt-to-income ratio which helps lenders determine the maximum mortgage loan amount you qualify for.
Homeowner's Insurance
Your insurance premium will be included in your debt-to-income ratio which lenders use to help determine the maximum mortgage loan amount you qualify for.
Home Value
The current market value of your home. At the time you buy a home this is often the purchase price of your home.
Home Value Inflation Rate
The expected average annual percentage change in the value of your home.
Your gross income before taxes and deductions. It may include wages, salary, alimony, child support, retirement and certain other income. Lenders may make adjustments to determine the amount of stable and continuous income that will be available to you and your spouse for loan qualifying purposes.
Income Tax Rate
Your marginal income tax rate is the rate at which any additional dollars of your income would be taxed at.
Index Rate
Rate Adjustment on ARMs are based on the index rate, the margin, the adjustment schedule, interest rate caps, and floor rate specified in your loan documents. Index rates change over time. They should be published and widely available. Common indexes used for setting mortgage rates have include the Prime Rate, Libor (London Interbank Offer Rate) and U.S. Treasury Rates.
Inflation Rate
The average annual percentage rate at which the prices of goods and services change.
The portion of your mortgage payment that is due to the interest rate being applied to the principal balance. The Total Interest for a mortgage is the sum of all interest paid over the life of a loan.
Interest Only
Interest-only mortgages allow borrowers to make interest-only payments for a specific period of time. Required mortgage payments can be significantly lower during the interest-only period since the borrower is not required to pay down the principal balance during that time. However, the borrower is taking on more risk since the balance is not being paid down. Interest-Only Mortgages come in a wide variety of types, including both fixed and adjustable rate mortgages.
Interest Rate
The percentage of the principal balance of your mortgage that determines how much interest you must pay. The interest rate on your mortgage may change or remain the same depending on the type of loan you have.
Interest Rate Adjustments
The interest rate changes on an adjustable rate mortage (ARM) during adjustment periods specified in your loan documents. Your interest rate may have a fixed period where it does not change followed by adjustements on a regularly scheduled basis. For example, the interest rate on a mortgage could be fixed for 2 years followed by adjustments every 6 months.
Interest Rate Caps
Limits how much your interest rate can be increased during each adjustment period for an ARM. The cap for the first adjustment period may be different than the cap on subsequent adjustments. There also may be a maximim overall cap on interest rate increases during the life of your loan.
Interest Rate Scenarios
To decide if an adjustable rate mortgage is right for you, you should how changes in interest rates will effect the mortgage. The adjustable rate mortgage calculator shows you how your payment changes in the best case where rates are set at the minimum for your mortgage, the worst case where rates are set at the maximum for your mortgage, and the stable case where rates remain constant for your mortgage.
Investment Earnings
Your investment earnings are the average annual percentage rate you expect to earn on your investments.
Loan Amount
The initial principal balance or your mortgage at closing.
Loan-To-Value Ratio
The Loan-To-Value (LTV) ratio is one of the ways lenders measure risk. A higher Loan-To-Value ratio means you have less equity in the home and the mortgage is riskier. Loan-To-Value ratios are calculated for first and second mortgages separately. Lenders also evaluate your Combined Loan-To-Value (CLTV) ratio which considers all mortgage liens on your property. If you keep your Loan-To-Value ratio below 80% you may be able to avoid being required to pay Private Mortgage Insurance (PMI).
Maintenance Costs
Your estimated annual maintenance cost.
When an ARM adjusts the margin is added to the index rate to help determine your interest rate. Interest rate caps and the floor rate for your mortgage may limit how much your actual interest rate changes. The margin typically is fixed for the life of the loan. It should be clearly specified in your loan documents.
Maximum Mortgage Payment
The maximum mortgage payment includes principal, interest, taxes, and insurance. It is based on the limit of a 36% debt-to-income ratio for conventional loans. While you may be able to find a lender that will approve you for a higher amount, you would be significantly increasing your risk.
Monthly Debts
Your recurring monthly payments on revolving and installment debt including car loans, personal loans, student loans, credit card balances.
Origination Points
A non-deductible fee paid to the lender to compensate for evaluating, processing, and approving your mortgage. You may be able to negotiate the number of origination points assessed on your mortgage. Each point is equal to one percent (1%) of the loan amount. For example, if your loan amount is $250,000, one point would cost you $2,500 in additional closing costs ($250,000*.01).
Other Debt
Other debt payments include alimony and child support payments, all rent or mortgage payments except those that will be replaced by your new mortgage, and required periodic payments on other loan obligations. It may not include debts that will be paid off in a relatively small number of months
Payment Shock
Occurs when the required minimum payment for a mortgage increases significantly. This can occur on adjustable rate mortgage when interest rates rise sharply, on interest-only mortgages when the interest-only period ends, and on balloon mortgages when the balloon payment is due.
The portion of your mortgage payment that is used to pay down the current balance of your mortgage. The principal balance represents how much you owe on the mortgage.
Private Mortgage Insurance (PMI)
Lenders often require borrowers to pay Private Mortgage Insurance (PMI) on mortgages with a loan-to-value ratio of more than 80%. PMI insures the lender in the event of a borrower default. Making a down payment of 20% or more of the purchase price of your home is one way you may be able to avoid being required to pay mortgage insurance.
Property Taxes
The property taxes on your home are included in the calculation of your debt-to-income ratio and in determining the maximum mortgage loan amount you qualify for.
Purchase Costs
Purchase costs as a percentage of the loan amount used to purchase your home, including lender fees, title fees, appraisal, inspection and other closing costs.
Refinance Fees
All closing costs for the new mortgage, including any discount points, loan origination fees, appraisal fees, title insurance, etc...
Refinance Savings/(Loss)
The refinance savings/(loss) estimates how a refinance will impact your financially.
Remaining Income
This is the money remaining after your debt and housing payments. The remaining income is the money you have available to pay taxes and other expenses and to contribute to savings.
Renovation Cost
The cost of renovations as a percentage of your home's value. Renovations should add value to your home, prolong, its useful life, or adapt it to new uses. They do not include costs of repairs or maintenance that are necessary to keeping your home in good condition, but do not add to its value or prolong its life. Renovations and other qualified improvements, can add to the cost basis of your home, if they are still part of the home when you sell it. This can help taxpayers by limiting the taxable portion of capital gains on the sale of the home and possibly avoiding the capital gains tax entirely, if the renovation costs reduce the capital gain to below the capital gains exclusion amount.
The rent you can comfortably pay each month.
Rent Broker Fee
Renters in large cities, such as New York City, may have to pay a fee to a broker. Landlords in these area may require the use of a broker since they may be relying on brokers to vet potential tenants. Broker fees can be significant, for example, one month's rent or 15% of annual rent.
Rent Inflation Rate
The expected average annual percentage change in your rent.
Renter's Insurance
Your annual renter's insurance.
Second Mortgage
The current principal balance of your second mortgage, if any. At the time you close on the second mortgage this would be your second mortgage loan amount.
Security Deposit
A security deposit is any money a landlord takes from a tenant other than the advance payment of rent. The security deposit serves to protect the landlord if the tenant breaks or violates the terms of the lease or rental agreement. It may be used to cover damage to the property, cleaning, key replacement, or back rent.
Selling Costs
Selling costs as a percentage of the purchase price of your home, including real estate agent commissions.
Standard Deduction
The dollar amount that reduces your taxable income if you do not itemize deductions. The standard deduction is based on your tax filing status.
Start Rate
The initial interest rate on an Adjustable Rate Mortgage.
Student Loan
Your total required monthly student loan payments
Tax Filing Status
Your tax filing status can be Single, Married Filing Jointly, Married Filing Separately, Head of Household, or Qualifying Widow(er) with Dependent Child. It can impact the tax benefits you receive, the amount of your standard deduction and the amount of taxes you pay. It may even impact whether you must file a federal income tax return.
Taxes and Insurance
Mortgage lenders generally require that taxes and insurance be included in a borrower's mortgage payments. These payments may be for property taxes, homeowner's/hazard insurance, and mortgage insurance. Other required payments may include homeowners' association dues.
The amortization term is one of the key factors that determine your required mortgage payment. Your required mortgage payment for fully amortizing mortgages is the amount that would result in the mortgage being closest to being paid off by the end of the amortization term. Longer amortization terms result in lower required mortgage payments for fully amortizating mortgages, all other things being equal.
Utility Costs
Fees for basic services such as electricity, gas, water and trash pick-up.