Faq & Terms

The following mortgage terms are provided as a reference. If you have a specific question, please contact a Home Town Mortgage Loan Officer.

What is a mortgage / what does ‘mortgage’ mean?

The word “mortgage” comes from the French word “Mort” which means dead, and “Gage” from Old English which means “pledge”. According to Sir Edward Coke, who lived from 1552 to 1634, the term came from the doubtfulness of whether or not a mortgagor would pay their debt. In those days, if the mortgagor did not, then the land pledged as security for the debt was taken away. The land was considered ‘dead’ to the mortgagor. The modern meaning of the term commonly refers to a loan for the purpose of purchasing a property. Home mortgages are the most common type of mortgage.

Accrued Interest:

Interest that is earned but not paid, but added to the amount owed.

Adjustable Rate:

An interest rate that changes periodically in relation to an index; payments may increase or decrease accordingly.

Adjustable Rate Mortgage (ARM):

A mortgage on which the interest rate, after an initial period, can be changed by the lender. While ARMs in many countries abroad allow rate changes at the lender’s discretion (“discretionary ARMs”), in the US most ARMs base rate changes on a pre-selected interest rate index over which the lender has no control. These are “indexed ARMs”. There is no discretion associated with rate changes on indexed ARMs.

Agreement of Sale:

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

Alternative Documentation:

Expedited and simpler documentation requirements designed to speed up the loan approval process. Instead of verifying employment with the applicant’s employer and bank deposits with the applicant’s bank, the lender will accept paycheck stubs, W-2s, and the borrower’s original bank statements. Alternative documentation remains “full documentation”, as opposed to the other documentation options.

Amortization:

Is a repayment method in which the amount you borrow is repaid gradually though regular monthly payments of principal and interest. During the first few years, most of each payment is applied toward the interest owed. During the final years of the loan, payment amounts are applied almost exclusively to the remaining principal.