Mortgage & Refinance Glossary – Plain-English Terms

Amortization: The process of paying off a loan with scheduled payments over time. Use our calculator to see how a new rate changes amortization.
APR (Annual Percentage Rate): The yearly cost of a loan, including interest and many fees. Compare APRs when evaluating refinance offers.
Balloon Payment: A large lump-sum payment due at the end of certain loans. Refinancing can help avoid or manage balloon payments.
Basis Points (bps): One basis point is 0.01%. A 50 bps change equals 0.50%.
Cash-Out Refinance: Replacing your mortgage with a larger one and taking the difference in cash. Compare it to a HELOC in our articles.
Closing Costs: Upfront fees (appraisal, title, lender, legal). Include them to find your break-even in our calculator.
CLTV (Combined Loan-to-Value): Total of all loans secured by the property divided by its value. Impacts pricing and eligibility.
Debt-to-Income Ratio (DTI): Monthly debt payments divided by gross monthly income. Lower DTI usually improves approval odds.
Discount Points: Optional fees you pay to reduce your interest rate. Model points vs. no points in the calculator.
Escrow: An account a lender uses to collect taxes and insurance with your monthly payment.
FHA Streamline Refinance: A simplified FHA refinance with reduced documentation. See our guides in the Articles section.
Fixed-Rate Mortgage: A mortgage with an interest rate that does not change for the term.
GFE (Good Faith Estimate): Older estimate form for closing costs; replaced by the Loan Estimate (LE) for most mortgages.
HELOC (Home Equity Line of Credit): Revolving credit secured by your home. Compare with cash-out refi before deciding.
HUD-1: Legacy closing statement (replaced by the Closing Disclosure for most transactions).
Interest Rate: The cost of borrowing expressed as a yearly percentage of the loan balance. Key driver of payment and total interest.
IRRRL (VA Interest Rate Reduction Refinance Loan): Streamlined VA refinance that can reduce rates and paperwork for eligible borrowers.
Jumbo Loan: A loan amount above conforming limits; often requires stronger credit and larger reserves.
LE (Loan Estimate): Standardized 3-page form showing projected payments and closing costs; provided after you apply.
Lender Credit: A credit from the lender, usually in exchange for a slightly higher rate, to offset closing costs.
LTV (Loan-to-Value): Loan amount divided by property value. Lower LTV can improve pricing.
Mortgage Insurance (MI/PMI): Insurance required when your down payment/equity is below certain thresholds. Some refinances remove PMI.
Mortgage Note: Your signed promise to repay the loan; outlines the rate, term, and payment schedule.
Net Tangible Benefit: A clear advantage to the borrower (e.g., lower rate, lower payment). Often required for streamlined refinances.
Origination Fee: A lender fee for processing the loan; typically part of closing costs.
Points: Also called discount points. One point equals 1% of the loan amount and generally lowers the rate.
Prepayment Penalty: A fee some loans charge if you pay off or refinance early. Ask your lender; it’s uncommon but possible.
Principal: The outstanding amount you owe (not including interest).
Rate Lock: A commitment from the lender to honor a specific rate for a set period (e.g., 30–60 days).
Refinance: Replacing your existing mortgage with a new one, usually to lower the rate, change term, or access cash.
Secondary Market: Where loans are sold to investors. It influences available rates and guidelines.
Settlement/Closing: The final step where you sign documents and the new loan funds.
Term: The length of time you have to repay the mortgage (e.g., 15 or 30 years). Shorter terms cut interest but raise payments.
Title Insurance: Protects against issues with the property’s title. Often required by lenders.
Underwriting: The lender’s review of your credit, income, assets, and property before approval.
VA Refinance: Refinance options for eligible veterans and service members (e.g., IRRRL).
Waiver of Appraisal: When allowed, the lender lets you skip a new appraisal based on risk data and AUS findings.
Yield Spread: The difference between the rate investors accept and the rate charged to borrowers; affects pricing and credits.
Zero-Cost (No-Cost) Refinance: Marketing term for a refinance where lender credits offset fees. Rate is usually a bit higher—compare the break-even in our calculator.

Next: read our Articles or try the Refinance Mortgage Calculator. Check quick answers in the FAQ.