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Using Refinance Index

jaschmidt | Dec 16, 2009 |

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The terminologies often encountered by people who intend to refinance their loan are vague unless they have a mortgage refinance index. The refinance index listed herein may be encountered when they enter into home refinancing:

Amortization- as a refinance index is the systematic and rational allocation of a loan by means of regular installments which involve the principal and the interest. If you want to make your own computation, this is now easily accessible through the Internet using the amortization schedule calculator. All you have to do is fill up the mortgage amount, term in months or years, interest rate per year, start date of mortgage and the monthly payments will be automatically computed.

Annual Percentage Rate (APR)- can either be a nominal APR or effective APR as a refinance index. The nominal APR is the annual simple interest rate while the effective APR pertains to compound interest rate per year plus the fees charged by the lender. The fees as part of the refinance index are late fees, monthly service charges, loan origination fees, or participation fees.

Appraised value- for property valuation as part of refinance index is the assessed value based on the judgment of a qualified appraiser. The appraiser may use this as reference in arriving at the appraised value of the improvements in the property, location, surrounding areas, etc. If the appraised value of a property is higher, the loan amount is probably higher. This is only one of the indications since there are still other factors to consider in the granting of a loan.

Balloon term- as part of the refinance index, pertains to the specific time indicated in the promissory note that the borrower will pay the principal and interest called the balloon term. Upon the expiration of the balloon term, the principal amount should be paid in full.

Closing costs- as a refinance index are the fees incurred in closing the real estate transaction such as cost of home insurance, recording, title search, survey and other fees,

Credit score- is the typical FICO score coming from the numerical figure from 300 to 850. As refinance index; 620 and above is best, 581-619 is good, 551-580 is fair, and 550 and lower is poor.

Discount points- or simply points are the upfront fee paid by the borrower to the lender. A point is equivalent to 1% of the principal amount.

Down payment- is the amount of initial cash payment that should be paid by the buyer in order to seal the real estate transaction.

Foreclosure- this resulted to the inability of the borrower to pay the loan that resulted to legal proceedings on the part of the lender. The title to the property held as collateral will be transferred in the lender's name; hence, the lender now becomes the owner of the property.

Hazard insurance- is also known as homeowner's insurance aims to protect the lender and the buyer of the property in case of damaged caused by weather, fire, etc.

Lien property- as refinance index is the property offered as collateral to guarantee the payment of the loan or amount borrowed.

Minimum payment- is the minimum amount that the borrower must pay, normally on a monthly basis, which may be in the form of interest or principal amount only, or both.

Mortgagee- as refinance index refers to the lender of the mortgage agreement.

Mortgagor- as refinance index is the borrower in a mortgage contract.

Principal amount- is the amount borrowed without the interest.

Property tax- is the tax imposed on the property by the municipality, city or country to which the property is located.

These are only some of the terminologies which serve as index for your quick reference. Any question that needs clarification should be referred to the loan officer handling your loan account. As a precaution, never sign any loan documents unless you have carefully read and understood the contents written therein.

Although these loan documents are in pre-printed form, take your time to fully understand its contents by using a refinance index. The transactions you are entering into involves money and the property you worked hard for can be affected in case of non-payment in the future. Read the documents first before signing anything.