margin:
The margin is the amount that is added to the index in order to calculate your interest rate for an adjustable-rate mortgage. Most loans have margins around 2.5 percent. Unlike the index (which constantly moves up and down), the margin never changes over the life of the loan.

mediation of disputes:
Mediation is a fast, inexpensive way to resolve simple contract disputes. In mediation, buyers and sellers present their differences to a neutral mediator who does not have the power to impose a settlement on either party. Instead, the mediator helps buyers and sellers work together to reach a mutually acceptable solution of their differences. It is probably in your best interests to mediate your problem before going to an arbitrator or suing in a court of law. (Also see arbitration.)

mortgage broker:
A mortgage broker is a person who can help you find a mortgage. Mortgage brokers buy mortgages wholesale from lenders and then mark the mortgages up (typically from 0.5 to 1 percent) and sell them to buyers. A good mortgage broker is most helpful for people who will not shop around on their own for a mortgage or for people who have blemishes on their credit reports.

mortgage life insurance:
Mortgage life insurance guarantees that the lender will receive its money in the event that you meet an untimely demise. Many people may try to convince you that you need this insurance to protect your dependents and loved ones. We recommend that you do not waste your time or money with this insurance! Mortgage life insurance is expensive. If you need life insurance, buy low-cost, high-quality term life insurance instead of mortgage life insurance.

multiple listing service:
A multiple listing service (or MLS) is a real estate agents' cooperative service that contains descriptions of most of the houses that are for sale. Real estate agents use this computer-based service to keep up with property they are listing for sale in their area.

negative amortization:
Although it may sound like science fiction jargon, negative amortization occurs when your outstanding mortgage balance increases despite the fact that you're making the required monthly payments. Negative amortization occurs with adjustable-rate mortgages that cap the increase in your monthly payment but do not cap the interest rate. Therefore, your monthly payments do not cover all the interest that you actually owe. If you have ever watched your credit card balance snowball as you made only the minimum monthly payment, then you already have experience with this phenomenon. Avoid loans with this feature!

origination fee:
See points.

partnership:
A partnership is a way for unmarried people to take title of a property. Partnerships most often occur among people who have a business relationship and who buy the property as either a business asset or for investment purposes. If you intend to buy property with partners, have a real estate lawyer prepare a written partnership agreement for all the partners to sign before making an offer to purchase.

periodic cap:
This cap limits the amount that the interest rate of an adjustable-rate mortgage can change up or down in one adjustment period. See also caps.

points:
Also known as a loan's "origination fee," points are interest charges paid up-front when you close on your loan. Points are actually a percentage of your total loan amount (one point is equal to 1 percent of the loan amount). For a $100,000 loan, one point costs you $1,000. Generally speaking, the more points that a loan has, the lower its interest rate should be. All the points that you pay on a purchase mortgage are deductible in the year that you pay them. If you refinance your mortgage, however, the points that you pay at the time that you refinance must be amortized over the life of the loan. If you get a 30-year mortgage when you refinance, for example, you can deduct only one-thirtieth of the points on your taxes each year.

prepayment penalty:
One advantage of most mortgages is that you can make additional payments to pay the loan off faster if you have the inclination and the money to do so. A prepayment penalty discourages you from doing this by penalizing you for early payments. Some states prohibit lenders from penalizing people who prepay their loans. Avoid mortgages which penalize prepayment!

principal:
The principal is the amount that you borrow for a loan. If you borrow $100,000, your principal is $100,000. Each monthly mortgage payment consists of a portion of principal that must be repaid plus the interest that the lender is charging you for the use of the money. During the early years of your mortgage, your loan payment is primarily interest.

private mortgage insurance (PMI):
If your down payment is less than 20 percent of your home's purchase price, you will likely need to purchase private mortgage insurance (also known as "mortgage default insurance"). The smaller the down payment, the more likely a homebuyer is to default on a loan. Private mortgage insurance can add hundreds of dollars per year to your loan costs. After the equity in your property increases to 20 percent, you no longer need the insurance. Do not confuse this insurance with mortgage life insurance.

probate sale:
A probate sale is the sale of a home that occurs when a homeowner dies and the property is to be divided among inheritors or sold to pay debts. The executor of the estate organizes the probate sale, and a probate court judge oversees the process. The highest bidder receives the property.

property tax:
You will have to pay a property tax on the home you own. Annually, property tax averages 1 to 2 percent of a home's value, but property tax rates vary widely throughout this great land.

prorations:
Certain items such as property taxes and homeowners association dues are continuing expenses that must be prorated (distributed) between the buyers and sellers at close of escrow. If the buyers, for example, owe the sellers money for property taxes that the sellers paid in advance, the prorated amount of money due the sellers at close of escrow is shown as a debit (charge) to the buyers and a credit to the sellers.

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