Acceleration is the action taken by a lender demanding early repayment of the entire loan balance when a borrower defaults on the terms of the loan agreement.
A balloon payment is the final payment on a loan when that payment is significantly greater than the preceding installment payments and pays off the loan in full.
A borrower is a person who has received a loan and is obligated to repay the amount borrowed (principal) with interest and other fees, according to the loan terms.
A ceiling on a charge; for example, an interest-rate cap would set a maximum interest rate to be charged on a loan, regardless of prevailing general interest-rate levels.
An official notification to a borrower from a lender indicating that the borrower's loan application has been approved and stating the terms of the prospective loan.
A provision in a mortgage that mandates the loan be paid in full when the property is sold. This clause protects lenders by ensuring the loan is not assumed by a potentially less creditworthy buyer.
A loan application is a document required by a lender prior to issuing a loan commitment. It typically includes details such as the name of the borrower, the amount and terms of the loan, a description of the collateral, and the borrower's financial and employment data.
A loan commitment is an agreement by a financial institution to lend a specified amount of money on established terms in the future. This commitment outlines the conditions under which the loan will be provided and ensures the borrower of available funds when needed.
The specific date on which the interest rate of an Adjustable-Rate Mortgage (ARM) can be recalibrated as per predetermined terms.
A prepayment penalty is a fee paid by a borrower for the privilege of retiring a loan early. It is not a tax-deductible interest expense.
