National portion

Financing & Settlement vocabulary

9 terms, defined plainly. Where a term is commonly confused with another, the definition says so — that confusion is usually the wrong answer.

Promissory note

The borrower's personal promise to repay — the evidence of the debt. The mortgage/deed of trust pledges the property as security for it.

Acceleration clause

Lets the lender declare the ENTIRE balance due on default.

Alienation (due-on-sale) clause

Lets the lender demand full payoff if the property is transferred — prevents loan assumption without consent.

Defeasance clause

Cancels the lien once the debt is fully paid — the borrower receives a release/satisfaction.

PMI

Private mortgage insurance protecting the LENDER on conventional loans above 80% LTV (less than 20% down).

Discount points

Prepaid interest paid at closing to buy down the rate — one point = 1% of the LOAN amount.

RESPA

Federal law on settlement procedures — requires the Closing Disclosure, prohibits kickbacks/unearned fees on federally related mortgage loans.

Voluntary vs. involuntary lien

Voluntary: created by the owner's consent (mortgage/deed of trust). Involuntary: by operation of law (tax, judgment, mechanic's liens).

Amortization

Repaying a loan with regular payments covering interest plus principal so the balance reaches zero at term's end.