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Mortgage and Real Estate Glossary ~ M

Margin

All loans have a margin to make it worthwhile for lenders to stay in business. A margin also refers to an adjustable rate's mortgage's (ARM) interest rate, which is made up of the margin plus the index, a value that represents overall market rates. A lender's margin is usually around 2.5%. Unlike the index, the margin on a loan never changes. If you are comparing two loans with the same index, choose the loan with the lower margin. To find out the margin on a loan, simply ask the lender. Some lenders may drop the margin by a hair in exchange for a sum paid up-front on the closing date.

To find out the margin, ask your lender which index is tied to your ARM. Possible indices include the Cost of Fund Index (COFI) and Treasury Bills. Then subtract the index value from your loan's interest rate. Note that your lender rounds off the interest rate to the nearest .125.
See: Initial interest rate, Adjustable rate mortgage

Maturity

When a loan completes its term. A 30-year loan reaches maturity in 30 years, similarly, a 15-year loan matures in 15 years. A balloon mortgage usually matures in 5 to 7 years, and when it does, the borrower will have to pay the full amount that is due.
See: Amortization

Mechanic's lien

A claim placed on a home by someone who didn't receive payment for construction work completed on the property. Almost all states allow workers who make improvements on a property, including contractors, painters, architects, carpenters, plumbers and even the gardener, to put a lien against your home if you don't pay them. This lien will appear on a preliminary title report and you cannot sell the property until you pay it.

Though not common, a mechanic's lien can lead to a foreclosure, which is when the creditor gets a court order to have your home sold to pay off the debt. The "mechanic" has up to 90 days to get the court order, if they miss the timeframe they can still sue you for the money owed.
See: lien, Cloud on title

Mortgage

A document that pledges your property as security for a loan's repayment. If you can not repay the loan on your home, a mortgage gives the lender the right to foreclose on the property and sell it to get back their money. A deed of trust serves the same purpose as a mortgage, however some states traditionally use one or the other-in some cases both, depending on the custom in each county. With a mortgage, the lender must go to court to foreclose on a property.

Mortgage banker

A company, or person, that lends money to home buyers. Mortgage bankers take on all the tasks related to lending money, such as gathering the funds for the loan, approving the borrower and closing the loan. Since mortgage bankers, unlike a bank, don't follow as many governmental rules and are loosely supervised by state laws, they are called "non-institutional" lenders. A mortgage company can be both a mortgage banker and a mortgage broker.
See: Mortgage broker

Mortgage broker

A company that helps a borrower get a loan in return for a fee. Mortgage brokers don't lend money -they help you shop for the best loan from a selection of lenders. Since mortgage brokers get discounted rates from lenders, you can get a lower rate from a broker than if you apply for a loan directly from a lender. Online mortgage brokers also charge significantly lower fees than traditional brokers, who can charge up to 2.5% of the loan amount.

Once you apply for the loan, the mortgage broker handles all the documents and works with the lender to make sure your loan gets approved. The mortgage broker may also order a copy of your credit report, the property appraisal and the title insurance. You pay a mortgage broker at closing, when you complete your home's purchase or refinance.
See: banker

Mortgagee

A formal term for the lender in a mortgage agreement.

Mortgage insurance (MI)

An insurance contract that protects the lender against loss if a borrower can not repay a loan. This gives you 10% equity in your property. If your down payment (or equity) is less than 20%, a lender will require you to buy MI. This is a lender's safety net in case you default on the loan and the lender forecloses on your property. The lender will use the money collected from MI to offset any losses. How much you need to pay each month in insurance depends on the loan amount, the type of loan and the down payment. Typically, it costs between 0.15%, to 2.5% of the loan amount. You might also have to pay one or two months worth of payments when you close on your home.

The good news is that you may not have to pay MI forever-some lenders let you end the policy when, based on an appraisal, you show a lender that you have at least 20% equity in your home. MI is also called Private mortgage insurance (PMI).
See: Down payment, Equity

Mortgage Insurance Premium (MIP)

A one-time fee required for insurance on a FHA mortgage. If you apply for a FHA mortgage, you have to pay MIP, which is about 2% of the loan amount, on the closing date. Since this is a chunk of money to be paid at one time, you do have the option to add this cost to your loan and pay it off over time.
See: Mutual Mortgage Insurance (MMI)

Mortgage life insurance

An insurance policy to repay your home loan in the event that you die. Mortgage life insurance can be an expensive way to protect your loved ones. It makes the lender the beneficiary of the policy; so if you die, the lender, not your heirs decides what to do with all the insurance money. Some life insurance companies continue to make monthly mortgage payments instead of paying off the mortgage in full. The premiums for mortgage life insurance are based on your age and the mortgage balance.

Mortgagor

A formal term for the borrower in a mortgage agreement.
See: Mortgagee

Mutual Mortgage Insurance (MMI)

A contract that protects a lender in case a borrower defaults on a FHA mortgage. If you have a loan that's insured by the Federal Housing Administration (FHA), you'll be required to give monthly payments for MMI. So, if you default on a loan, the lender has two ways to get their money back - sell your property or ask for repayment from the FHA, which will use the money collected from MMI. On top of MMI, you have to pay a one-time fee, about 2% of the loan amount, on the closing date. You can also choose to tack this fee onto the loan amount and pay it over time.
See: Mortgage Insurance Premium , FHA mortgage

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