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| Second Mortgage |
A mortgage that puts a lien on a home that is second in position to the lien placed by a first mortgage. If for some reason your home were to be foreclosed on, the lender who holds your first lien would need to be satisfied prior to the satisfaction of the second lien. The second lien is sometimes referred to as a "junior" lien. |
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| Secured Loan |
Whenever you borrow money and the loan is backed by collateral, it is referred to as a secured loan. If you default on the loan, the lender can take possession of the collateral in order to avoid loss. With a mortgage, your home is the collateral and with a car loan, your automobile would be the collateral of the loan. |
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| Security |
The collateral or property that you pledge to secure a loan. When you borrow money to purchase a car, the auto is often used as the security of the loan. With a home loan, you usually pledge your home as security. |
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| Servicer |
The company that sends you your monthly statement and collects your monthly mortgage payment. Some loans are serviced by the lenders that created them, while others are serviced by companies that act on behalf of the lenders. The mortgages these companies usually service are mortgages that have been purchased in the secondary mortgage market. |
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| Servicing |
The process of collecting monthly mortgage payments, mailing of statements, the payment of expenses out of an escrow account, and all other operational procedures related to the handling of a mortgage. |
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| Settlement |
When you purchase a property, the time at which you pay for the home and you and the seller sign the final documents is referred to as closing or settlement. At this time, the deed will be prepared for recording and the mortgage period will officially begin. Different states have different procedures regarding settlement. Your settlement will be either face to face with a seller at a meeting or will be handled in escrow. If your settlement is face-to-face, you'll normally have your real estate agent and attorney with you as well as a representative for your lender. |
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| Shared Appreciation Mortgage (SAM) |
A mortgage program where the lender receives a percentage of a home's future appreciation in return for receiving a lower interest rate or interest deferral. While the shared appreciation mortgage (SAM), does assign the lender a right to part of the property's appreciation, it does not create a shared title interest or a joint tenancy. |
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| Simple Interest |
When the interest on your loan is computed solely on the principal balance of your loan, it is referred to as simple interest. When the simple interest of a loan is calculated, no compounding or accrual of interest occurs. For example, on a $1,000 loan with an interest rate of 10 percent, the simple interest would be $100 per year. |
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| Standard Payment Calculation |
The calculation that is used to figure out the monthly payment that is required for a loan holder to repay the balance of a mortgage in equal monthly installments over the time that remains on a mortgage at a current rate of interest. |
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| Step Rate Mortgage |
A mortgage, in which the interest rate gradually increases over the first few years of the loan. This allows you to have a lower monthly mortgage payment at the beginning of the loan term. The initial interest rates of these loans are generally lower than the interest rates of a 30-year fixed loan, but higher than the interest rate of a 1-year ARM. |
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| Subordinate Financing |
A loan that places a secondary or "junior" lien on property. In the event of foreclosure, the lender holding the primary lien on your property would be paid prior to the lender holding the secondary or "junior" lien. |
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