MORTGAGE DICTIONARY

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CALL OPTION (PROVISIONS, RIGHTS):
A lender's right to demand payment of the outstanding balance of the loan at a time specified in the loan agreement.

CAP:
A limit. In variable rate mortgages, a limit as to how high periodic payments may go or how much the interest may change within a given time period or over the life of the mortgage.

CASH RESERVE:
An amount of money that the purchaser of a property still has after the transaction closes. Some lenders require a certain level of cash reserve (equal to two payments) before granting a mortgage.

CASH-OUT REFINANCE:
When an owner renegotiates or negotiates a new mortgage and the proceeds of the new financing exceed the money required to pay out the old mortgage and any other costs, liens or expenses, leaving money for the borrower.

CEILING:
The limit over which the interest rate on a variable rate mortgage may not rise over the life of the loan.

CERTIFICATE OF ELIGIBILITY:
Document issued by the Department of Veteran's Affairs to qualifying veterans which entitles them to apply for subsidized or guaranteed loans.

CERTIFICATE OF REASONABLE VALUE (CRV):
Document issued by the Department of Veterans Affairs (VA). Based on an appraisal, sets out market value of a particular property for the purposes of establishing maximum principal amount available for a VA mortgage on the property.

CERTIFICATE OF SATISFACTION:
Document registered on title which provides evidence from the lender that a loan instrument (deed of trust, mortgage, other lien) has been paid out and released.

CERTIFICATE OF VETERAN STATUS:
Document issued by Department of Veteran's Affairs confirming that the person named in the Certificate has served at least 90 days of continuous active duty (including training time) and is eligible for certain VA benefits (such as a VA mortgage).

CHANGE FREQUENCY:
Term describing the period of time between changes in the interest rate and/or payments of a variable rate (adjustable rate) mortgage or loan (i.e. one week, one month etc.).

CHATTEL MORTGAGE:
A debt secured against items of personal property rather than against land, buildings and fixtures.

CLOSED MORTGAGE:
A land loan that cannot be prepaid or re-negotiated before the end of its term without the payment of an interest penalty.

CLOSED-END MORTGAGE:
A mortgage with a set principal amount which cannot be increased or extended during the life of the mortgage.

COLLATERAL:
Property (real or personal) which is pledged to secure a loan or mortgage. If the debt is not paid, the lender has the right to sell the collateral to recoup the outstanding principal and interest on the loan.

COLLATERAL MORTGAGE:
A loan which is secured by some sort of written note of indebtedness (such as a Promissory Note) which is secondarily secured by a mortgage registered against a property.

COLLECTION:
The act of pursuing a debtor who is delinquent on his loan payments.

CO-MAKER:
Also known a guarantor. Someone who signs a loan document along with the principal borrower, pledging to be responsible for the loan should the borrower fail to pay it.

COMMITMENT:
A promise, usually in writing, to provide a mortgage or other loan. May also be used in insurance field. Sets out details of mortgage, insurance. Often referred to as Commitment Letter or Binder.

COMMITMENT FEE:
The fee charged by the lender to commit itself to a mortgage or loan on specific terms.

COMMUNITY HOME BUYER'S PROGRAM:
Program established to find creative ways to finance home purchases for people with modest income.

COMMUNITY HOME IMPROVEMENT MORTGAGE LOAN:
A loan for up to 95% of the value of the property to allow persons of modest income to become home owners or to make improvements to their existing homes.

COMPOUND INTEREST:
As opposed to simple interest. The accumulation of interest on a loan over time where interest is charged not only on the principal of the loan but also on all interest accrued against the principal to the end of the last compound period.

CONSTANT PAYMENT LOAN:
A type of loan which requires equal, periodic payments over a certain term, at the end of which the amount owing under the loan will be completely paid out.

CONSTRUCTION LOAN:
A structured, short-term loan to a builder or developer to allow for the development of land. Funds are advanced at certain stages of the development project to pay for specific expenses, fees or costs.

CONSUMER REPORTING AGENCY (OR BUREAU):
Also known as Credit Bureau. The source to which the banks or other lenders turn for information on the credit history of an applicant.

CONVENTIONAL LOAN:
1. A loan or mortgage to which the normal rules of such transactions apply without the inclusion of a government program (i.e. VA or FHA insurance).
2. A loan or mortgage with a fixed interest rate, fixed payments and a fixed term.

CONVERSION CLAUSE:
A provision in a variable rate mortgage (adjustable rate mortgage) which allows the borrow to change the mortgage to a fixed rate mortgage upon the occurrence of certain events.

CONVERTIBILITY CLAUSE:
See "Conversion Clause".

COVENANT:
A promise contained in a contract or agreement.

CREATIVE FINANCING:
An arrangement for the financing of the purchase of a property which is outside the normal practice of residential financing.

CREDIT:
1. The ability to access money, to use money prior to earning it.
2. The accounting term for a liability or for equity, entered on the right side of the ledger.
3. As a verb, to allot for the benefit of a person (i.e. You must credit the Purchaser on closing for the deposit paid).

CREDIT HISTORY:
A statement of the debts and obligations, whether current or past, of a person which helps a lender to assess the risk of a loan to that person.

CREDIT LIFE INSURANCE:
A form of insurance which is designed specifically to pay out the debts of the insured person in case of their death.

CREDIT LIMIT:
The maximum amount available to a person under a loan, credit card or other borrowing arrangement.

CREDIT RATING:
Based on an analysis of a person's credit history, an evaluation of that person's ability to manage a new debt or debts overall.

CREDIT RISK:
The potential for a borrower to fail to live up to her obligations under a loan arrangement.

CREDITOR:
Any person to whom money is owed. May be secured (the debt has been registered against the property of the debtor) or unsecured.

CUMULATIVE INTEREST:
The total amount charged as interest on a loan or mortgage to a certain date.