Chapter 15

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Chapter 15 Vocab words
McKenzie Layton
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McKenzie Layton
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Subprime loan A loan with a rate higher than prime due to uncertainty of payment, 403.
Fixed-rate mortgage Monthly payment fixed over number of years, usually 30 years, 403, 404.
Graduated-payment mortgage (GPM) Borrower pays less at beginning of mortgage. As years go on, the payments increase, 404.
Adjustable 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, 404.
Interest-only mortgage Type of mortgage where in early years only interest payment is required, 404.
Biweekly mortgage Mortgage 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, 403, 404.
Mortgage Cost of home less down payment, 404.
Reverse mortgage Federal Housing Administration makes it possible for older homeowners to live in their homes and get cash or monthly income, 404–405.
Monthly payment Amount paid each period to pay off part of the mortgage, 405–408.
Amortization table A table that shows each periodic payment on a loan or mortgage, 405–406.
Closing costs Costs incurred when property passes from seller to buyer such as for credit reports, recording costs, points, and so on, 407.
Points Percentage(s) of mortgage that represents an additional cost of borrowing. It is a one-time payment made at closing, 407.
Escrow account Lending institution requires that each month of the insurance cost and real estate taxes be kept in a special account, 408.
Home equity loan A loan using the borrower’s home equity as collateral, 404, 408.
Home equity line of credit A revolving line of credit secured by your home equity, 408.
Cash-out refinance Borrowing more than the current mortgage and taking the difference out in cash, 408.
Amortization schedule Shows monthly payment to pay back loan at maturity. Payment also includes interest. Note payment is fixed at same amount each month, 409.
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