Mortgage Glossary - P
Definitions of Mortgage Terms
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- Per Diem Interest - Interest that is charged daily; usually refers to the partial month's interest that the buyer pays on the mortgage covering the period from the day of closing to the end of the month.
- Periodic rate Cap - For an adjustable-rate mortgage, 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.
- Point- A point is 1 percent of the amount of the mortgage.
- Prepaid Interest - Interest that a borrower pays before it is due, usually to save taxes.
- Prepayment Penalty - A lender's charge to the borrower for paying off the loan before the end of the term.
- Prepayment Plan - Any amount paid to reduce the principal balance of a loan before the due date. Payment in full on a mortgage that may result from a sale of the property, the owner's decision to pay off the loan in full, or a foreclosure. In each case, prepayment means payment occurs before the loan has been fully amortized.
- Prime for Life - A type of line of credit loan coveted by consumers that fixes the interest at the prime rate for the life of the loan.
- Prime Rate - The interest rate that banks charge to their preferred customers. Changes in the prime rate are widely publicized in the news media and are used as the indexes in some adjustable rate mortgages, especially home equity lines of credit. Changes in the prime rate do not directly affect other types of mortgages, but the same factors that influence the prime rate also affect the interest rates of mortgage loans.
- Principal - The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage.
- Private Mortgage Insurance (PMI) - Mortgage insurance that is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require MI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.
- Purchase Agreement - A document in which a property's buyer and seller approve the price and other terms of the transfer of title. Also known as an agreement of sale, a purchase contract or a sale contract.
- Purchase-money Mortgage - A home loan that a borrower obtains to buy property, using the property as collateral for the loan.