Glossary of Terms
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Minimum Payment
The minimum amount you are required to pay the credit card issuer each month. You may, however, choose to pay more. Paying the minimum monthly payment may be helpful when you can only afford to make a small payment. However, interest charges can really add up when you stretch out a loan with minimum payments.
Monthly Periodic Rate
The rate of interest per month, calculated by dividing the annual percentage rate (APR) by 12.
Mortgage
A lien or claim against real property given by the buyer to the lender as security for money borrowed. First Mortgage-or "primary" mortgage-has priority over the claims of subsequent lenders for the same property. 2nd Mortgage or "secondary" mortgage-is a loan secured by mortgage or trust deed, which lien is "junior" to another mortgage or trust.
Mortgage Insurance
Insurance needed for mortgages with low down payments (usually less than 20% of the price of the home).
Mortgage Insurance Premium
The cost of the insurance provided to lenders by the Federal Housing Administration (FHA), which is paid by the individual homebuyer. MIP is made up of two parts: an up-front cost of 1.5% of the mortgage amount, plus an annual premium of 0.5% of the loan amount to be paid on a monthly basis. Mortgage insurance helps to protect lenders from losses in the event of a mortgage default and foreclosure. The annual MIP may be canceled when the mortgage amount is reduced to 78% or less of the property value (also known as 22% or more of home equity value).
Mortgage Qualifying Ratio
Used to calculate the maximum amount of funds that an individual traditionally may be able to afford. A typical mortgage qualifying ratio is 28: 36.
