Glossary of Terms

Following are mortgage and real estate related terms and definitions you may find helpful.

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Negative Amortization: (Also called "Deferred Interest"). A gradual increase in mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due. The amount of the shortfall is added to the remaining balance to create "negative" amortization.

Net cash flow: The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense, which includes principal, interest, taxes, and insurance (PITI) for the mortgage, homeowners' association dues, leasehold payments, and subordinate financing payments.

Net Effective Income: Gross income less federal income tax.

Net Monthly Income: Your take-home pay after taxes. It is the amount of money that you actually receive in your paycheck.

Net Worth: The value of all assets, including cash, less total liabilities.

No cash-out refinance: A refinance transaction in which the new mortgage amount is limited to the sum of the remaining balance of the existing first mortgage, closing costs (including prepaid items), points, the amount required to satisfy any mortgage liens that are more than one year old (if the borrower chooses to satisfy them), and other funds for the borrower's use (as long as the amount does not exceed 1 percent of the principal amount of the new mortgage).

Non-liquid asset: An asset that cannot easily be converted into cash.

Note: A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

Note rate: The interest rate stated on a mortgage note.

Notice of Default: A formal written notice to a borrower that a default has occurred and that legal action may be taken.

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