Mortgage Terminology

Partial Payment

A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan.

Partial Release

An instrument discharging only a portion of the secured property from a lien.

Party Wall

A wall built on a line between two adjoining properties and common to both owners.

Patent

In real estate, the original document issued for the purpose of granting public land to an individual.

Payment Change Date

The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment adjustable-rate mortgage (GPARM). Generally, the payment change date occurs in the month immediately after the adjustment date.

Payment Shock

A scenario in which monthly mortgage payments on an adjustable rate mortgage (ARM) rise so high that the borrower may not be able to afford the payments. Consumer protection guidelines regarding extremely low initial "teaser" rates, lifetime ceilings, and annual caps are designed to prevent payment shock.

Payoff Letter

A statement detailing the unpaid principal balance, accrued interest, outstanding late charges, legal fees, and all other amounts necessary to pay off the lender in full.

Percolation Test

A test performed on soil to determine its ability to absorb liquid, for either septic tank or construction purposes.

Perfecting Title

The elimination of claims against title.

Periodic Payment Cap

For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease during any one adjustment period.

Personal Property

Any property that is not real property. Also called "chattel."

Periodic Rate Cap

For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.

Permits

With most major home improvement projects, work permits may be required. Permits provide legal permission to undertake a project and are usually given by local governments agencies. Some of the most common permits are for general projects or permits that require you to meet specific local building codes. You may want to check with your local government to determine if there are building restrictions in historic areas or in environmentally-sensitive areas.

Personal Property

Any property that is not real property.

PITI

Principle, interests, taxes and insurance (PITI) are the four components of a monthly mortgage payment.

-- Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage.
-- Interest is the fee charged for borrowing money.
-- Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and hazard insurance.

PITI Reserves

A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.

Planned Unit Development (PUD)

A project or subdivision that includes common property that is owned and maintained by a homeowners' association for the benefit and use of the individual PUD unit owners.

Planning Commission

A local or regional organization, normally a government agency, responsible for the preparation and adoption of comprehensive long-term general plans for the physical development of property within its jurisdiction.

Plans and Specifications

Architectural and engineering drawings and specifications for construction of a building or project. They include a description of materials to be used and the manner in which they are to be applied.

Plat

A map representing a piece of land subdivided into lots with streets, boundaries, easements, and dimensions shown thereon.

Plat Book

A book showing the lots and legal descriptions of the subdivisions of an area, usually recorded and kept in city and county government offices.

Plot Plan

A layout of improvements on a site, including their location, dimensions, and landscapes. The plot plan is generally a part of the architectural plan.

POC

A charge which is paid outside of closing. This would include closing costs such as the appraisal and credit report which an applicant pays up-front to the lender.

Point

A one-time charge by the lender for originating a loan. A point is 1 percent of the amount of the mortgage.

Police Power

In real estate, that right by which the state or other governmental authority may take, condemn, destroy, impair the value of, limit the use of, or otherwise invade property rights. It must be affirmatively shown that the property was taken to protect the health, morals, safety, or the general welfare of the public.

Power of Attorney

A legal document that authorizes another person to act on one's behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.

Pre-Approval

When you work with your lender to get pre-approved, you are getting an indication of how much money you will be eligible to borrow when you apply for a mortgage. This process occurs before you complete an application for a loan. Pre-approval includes a screening of a borrower's credit history, and all information you give to your lender will be verified when you apply for your mortgage.

Pre-Qualification

The process of determining how much money a prospective home buyer will be eligible to borrow before he or she applies for a loan.

Prearranged Refinancing Agreement

A formal or informal arrangement between a lender and a borrower wherein the lender agrees to offer special terms (such as a reduction in the costs) for a future refinancing of a mortgage being originated as an inducement for the borrower to enter into the original mortgage transaction.

Preforeclosure Sale

A procedure in which the investor allows a mortgagor to avoid foreclosure by selling the property for less than the amount that is owed to the investor.

Preliminary Title Search

A title search by a title company prior to issuance of a title binder or commitment to insure.

Premises

A defined portion of land and the improvements thereon as described in a deed, deed of trust, or mortgage.

Prepaid Interest

Mortgage interest that is paid in advance of when it is due to obtain tax advantages.

Prepaid Items

Costs paid at closing for taxes, interest, and insurance. Because prepaid items are recurring costs that do not relate to the acquisition of the property itself, they cannot be financed. Also called "prepaids."

Prepayment

Any amount paid to reduce the principal balance of a loan before the due date. Payment in full on a mortgage that may result from a sale of the property, the owner's decision to pay off the loan in full, or a foreclosure. In each case, prepayment means payment occurs before the loan has been fully amortized.

Prepayment Penalty

A fee that may be charged to a borrower who pays off a loan before it is due. If you pay off your mortgage before it is due, you may be charged a fee -- this is referred to as a prepayment penalty. Any amount that is paid to reduce the principal balance of a loan before the due date -- such as the sale of the property, the owner's decision to pay the loan in full, the owner's decision to pay additional money every month to lower the principle or interest -- is considered prepayment. You may want to consider discussing the specifics of this fee as you negotiate the terms of your loan with your lender.

Prime Rate

The interest rate that banks charge to their preferred customers. Changes in the prime rate influence changes in other rates, including mortgage interest rates.

Primary Residence

Residence which the owner physically occupies and uses as his or her home.

Principal

The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage. One of the terms you're likely to hear when you talk about a mortgage with your lender is principal. The principal is the amount originally borrowed or the amount that remains to be paid once you have started making payments. It is also the part of the monthly mortgage payment that reduces the remaining balance of a mortgage. The principal balance is the outstanding amount of principal on a mortgage; it does not include interest or any other charges.

Principal Balance

The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges. Also see "Remaining Balance"

Private Mortgage Insurance (PMI)

Also known as Mortgage Insurance, PMI is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require PMI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.

Promissory Note

A written promise to repay a specified amount over a specified period of time.

Property Tax

The amount which the state and/or locality assesses as a tax on a piece of property.

Property Inspection

The physical review/evaluation of a property to determine its current structural condition, to report any deferred maintenance and/or environmental problems, and to verify leasing status.

Prorate

To proportionally divide amounts owed by the buyer and the seller at closing.

Public Auction

A meeting in an announced public location to sell property to repay a mortgage that is in default.

Purchase and Sale Agreement

A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold. The Purchase and Sale Agreement is a written contract that is signed by the buyer and seller. It states the terms and conditions under which a property will be sold. It includes:

-- description of property,
-- price offered,
-- down payment,
-- earnest money deposit,
-- financing,
-- personal items to be included,
-- closing date,
-- occupancy date,
-- length of time the offer is valid,
-- special contingencies, and
-- inspection.

Purchase Money Transaction

The acquisition of property through the payment of money or its equivalent.