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The HSH Mortgage Glossary N-P

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The Mortgage Glossary Index:

A-B C D-E F-I J-M N-P Q-S T-Z

Negative Amortization
A condition where the loan balance goes up, rather than down, as payments are made. If a payment is not large enough to cover the interest due the difference is added to the principal. Negative amortization can occur in certain types of adjustable rate mortgages.

No Cost Refinance
A refinance with the fees and charges are added to the new mortgage amount instead of being paid up front.

Non Conforming Loan
A mortgage which does not conform to credit or other standards, or to the maximum loan limits set by Fannie Mae and Freddie Mac. See Jumbo Loan

Note
A signed, formal document obligating a borrower to repay a loan at a stated interest rate during a specified period of time.

Note Rate
The stated interest rate on a mortgage or other loan agreement.

Origination
The process of making a loan; the sequence of steps needed to document borrower assets and credit, property appraisal, and so on.

Origination Fee
A fee charged by a lender to cover certain expenses associated with the loan origination. Usually stated as a percentage of the face value of the loan (points).

Party Wall
The wall between two adjoining properties, such as between apartments in a condominium.

Percolation Test
A test to determine soil seepage capacity for properties where a septic tank is in use or being considered.

Permanent Financing
A mortgage which replaces a construction loan after construction is complete.

Periodic Cap
See Caps

Personal Property
In most states, any property that is not real property. (Definitions vary.) See Real Property

PITI
Principal, Interest, Taxes and Insurance. The four components that (for most homeowners) make up the monthly mortgage payment. Principal and interest are the portions of the payment assigned to repay the mortgage; the tax and insurance components are accumulated in an escrow account to make payments when they are due.

PITI reserves
A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.

Planned Unit Development (PUD)
A type of ownership with privately owned lots and buildings, and jointly owned common areas and facilities.

Point
A point is equal to 1 percent of the mortgage. One point on a $100,000 mortgage would be $1,000, for example. Discount points are simply interest that is paid up-front. Most lenders offer mortgages with several combinations of points and interest rates; generally, more points means a lower interest rate, less points means a higher rate.

Pre Approval
An approval for credit issued by a lender before the borrower has selected a property. Usually issued for a stated maximum loan amount and under certain conditions and assumptions regarding interest rates and other factors.

Prepayment
Any amount paid to reduce the principal balance of a loan before the due date. Payment in full when a property is sold. Also where additional or augmented monthly payments to reduce the loan balance prematurely.

Prepayment Penalty
A fee that may be charged to a borrower who pays off a loan before it is due.

Prequalification
Usually, a written opinion of the ability of a borrower to qualify for a home loan.

Prime Rate
The rate charged by banks to their preferred customers. Often used as the index for Home Equity Credit Lines but only rarely for first mortgages.

Principal
The amount of debt, not including interest, left on a loan; the total amount of a loan before any payments are made.

Principal Balance
The remaining balance on a mortgage. The principal balance does not include interest or any other charges.

Private Mortgage Insurance (PMI)
See Mortgage Insurance (MI)

Purchase Agreement
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Purchase Money Mortgage
A mortgage used for the acquisition of a property.

PUD
See Planned Unit Development (PUD)

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