Debt Consolidation Glossary of Terms

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Glossary - P

periodic cap
In an adjustable-rate mortgage (ARM), it limits how much an interest rate can increase or decrease from one adjustment period to the next.

PITI
Acronym for the elements of a mortgage payment: principal, interest, taxes and insurance.

Planned Unit Developments (PUD)
A type of real estate project that gives each unit owner title to a residential lot and building and a nonexclusive easement allowing access to the project's common areas. See common area assessment.

points
A point equals 1 percent of a mortgage loan. Lenders charge points as a way to make a profit. Borrowers may pay discount points to reduce the loan interest rate. Buyers are prohibited from paying points on HUD or VA guaranteed loans. On a conventional mortgage, points may be paid by either buyer or seller or split between them. Within limits, points are usually tax deductible. Also see interest tax deduction.

prepayment penalty
A lender’s charge to the borrower for paying off the loan before the end of the term.

principal
1. The amount of money borrowed. 2. The amount of money owed, excluding interest. 3. The client of a real-estate agent.

private mortgage insurance (PMI)
A policy that protects the lender by paying the costs of foreclosing on a house if the borrower stops paying the loan. Although PMI protects the lender, it is paid monthly by the borrower. Private mortgage insurance usually is required if the down payment is less than 20 percent of the sale price.