Mortgage calculators glossary

Amortization: Repaying a loan through scheduled payments that cover interest first and gradually more principal.
Annual percentage rate: The yearly cost of credit including interest and certain finance charges, disclosed under the Truth in Lending Act.
Appraisal: An independent opinion of market value used by the lender.
Break-even point: The month when savings from a refinance or points equal the upfront cost.
Cash-out refinance: A refinance where the new loan exceeds the payoff and the borrower receives the difference.
Closing Disclosure: The five-page form you receive at least three business days before closing showing final loan terms and costs.
Conforming loan limit: The maximum loan size Fannie Mae and Freddie Mac can buy, set each year by the FHFA.
Debt-to-income ratio (DTI): Monthly debt payments divided by gross monthly income.
Discount points: Prepaid interest paid at closing to reduce the interest rate.
Escrow account: An account your servicer uses to pay property taxes and insurance from monthly deposits.
HELOC: A home equity line of credit, a revolving second lien.
Lender credit: A credit toward closing costs in exchange for a higher interest rate.
Loan Estimate: The standardized three-page form a lender must provide within three business days of application.
Loan-to-value (LTV): The loan amount divided by the property value.
PITI: Principal, interest, taxes and insurance.
Principal: The amount borrowed, or the unpaid balance.
Private mortgage insurance (PMI): Insurance on conventional loans that protects the lender when equity is low.
Rate lock: A lender’s commitment to hold a rate and price for a set period.
Rescission: The right to cancel certain refinances of a primary residence within three business days after closing.
Servicer: The company that collects payments and manages the loan after closing.