Financing -- Terms
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Ø      Acceleration clause:  contract clause that gives a lender the right to declare the entire loan balance due immediately because of borrower default.

Ø      Alienation clause:  contract clause that gives the lender certain stated rights when there is a transfer of ownership in property.

Ø      Annual percentage rate (APR):  the total cost of financing a loan in percentage terms, as a relationship of the total finance charges to the total amount financed.  The APR tells a borrower the total cost of financing the loan in percentage terms.  Finance charges are more than just interest.  When a buyer must pay points and a loan fee, the APR will be higher than just the interest rate.  For example, a mortgage loan with an 11% interest rate may have an APR of 11 ½%, representing the total cost of the loan.

Ø      Discount points:  an amount paid to a lender when a loan is made to make up the difference between the current market interest rate and the rate a lender gives a borrower on a note.  Discount points increase a lender’s yield on a loan, allowing the lender to give a borrower a lower interest rate.

Ø      Fully amortized:  when the total payments over the life of the loan will pay off the entire balance of principal and interest by the end of the loan term.

Ø      Loan origination fee:  fee charged by the lender to cover administrative costs of making a loan, usually based on a percentage of the loan amount (where 1% = 1 point).

Ø      Loan-to-value ration (LTV):  the amount of money borrowed compared to the value (or price) of the property.

Ø      Prepayment penalties:  fees that a lender charges the borrower for paying off a loan early.

Ø      Private Mortgage Insurance (PMI):  insurance offered by private companies to insure a lender against default on a loan by the borrower (covers the first 20-25%).  There is usually a fee at closing and a renewal premium.
 

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