Mortgage Terms

P

Partial Payment
A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan.

Payment Adjustment Period
The length of time (typically a year) between changes to the AML borrower's P&I payment.

Payment Buy Down
Payment buy downs occur when a third party, typically a builder, pays part of the initial P&I payments for a year or two, so that the borrower has smaller payments and can qualify for the loan.

Payment Cap
A limit on the amount the payment can be changed at the end of each Payment Adjustment Period.

Payment Change Date
The date when a new monthly payment amount takes effect on an adjustable-rate mortgage.

Payment Discount
In a payment discount, the lender reduces the first year's interest rate to make the mortgagor more attractive to borrowers.

Payoff
The complete repayment of loan principal, interest and other amounts due.

Periodic Payment Cap
A limit on the amount that payments can increase or decrease during any one-adjustment period.

Periodic Rate Cap
A limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.

Personal Property
Any property that is not real property.

PITI
Principal, Interest, Taxes and Insurance are components of a mortgage payment.

Plat
A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements.

Points
A one-time charge by the lender to increase the yield of the loan; a point is 1 percent of the amount of the mortgage.

Power of Attorney
A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.

Prepayment
Payment of mortgage loan, or part of it, before due date.

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

Pre-qualification
The process of determining how much money a prospective homebuyer will be eligible to borrow before application.

Prime Rate
The interest rates that banks charge to their preferred customers.

Principal
The amount borrowed or remaining unpaid, also, that part of the monthly payment that reduces the outstanding balance of a mortgage.

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

Principal, Interest, Taxes, and Insurance (PITI): The four components of a monthly mortgage payment. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance.

Private Mortgage Insurance
Insurance provided by nongovernmental insurers that protect lenders against loss if a borrower defaults.

Promissory Note
A written promise to repay a specified amount over a specified period of time.

Public Auction
A meeting in an announced public location to sell property to repay a mortgage that is in default.

Planned Unit Development (PUD)
A project or subdivision that includes common property that is owned and maintained by a homeowners' association for the benefit and use of the individual PUD unit owners.

Purchase Agreement
See Agreement of Sale.

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

Purchase Money Transaction
The acquisition of property through the payment of money or its equivalent.