8.1 HW Flashcardizz - Mortgage Loans/Down Payments

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What is a down payment?

Back

An initial payment made when something is bought on credit, typically a percentage of the total purchase price.

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How do you calculate a down payment?

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Multiply the purchase price by the down payment percentage. For example, for a $200,000 home with a 20% down payment, the calculation is $200,000 x 0.20 = $40,000.

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What is a mortgage?

Back

An installment loan that provides money for purchasing a house, secured by the property itself.

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What is an auto loan?

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An installment loan that provides money for purchasing a car, secured by the vehicle.

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What is the principal in a loan?

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The original sum of money borrowed or the amount still owed on which interest is calculated.

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What is interest in the context of loans?

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The cost of borrowing money, usually expressed as a percentage of the principal.

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What is the purpose of a mortgage?

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To allow individuals to purchase a home without paying the full price upfront, by borrowing money and repaying it over time.

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What is the difference between a fixed-rate mortgage and an adjustable-rate mortgage?

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A fixed-rate mortgage has a constant interest rate throughout the loan term, while an adjustable-rate mortgage has an interest rate that may change at specified times.

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What does it mean to be 'underwater' on a mortgage?

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When the outstanding balance on a mortgage is greater than the current market value of the property.

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What is private mortgage insurance (PMI)?

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Insurance that protects the lender in case the borrower defaults on the loan, typically required when the down payment is less than 20%.