Ever wonder what all of those real estate terms mean? They can often be confusing. I remember the first time that I ever heard about points and how they could lower your interest rate. Everyone just assumed that I knew all about them, when I had never heard about points before and how they played a role in getting a mortgage. Heck, I had never lived in, let alone purchased, a home before.
Just in case you find yourself in a similar situation or want to be able to point a friend in the right direction about real estate, I offer a solution. I would like to share with you three of the most common real estate terms and what they mean.
Mortgage Lien
A lien on a property is whatever the previous owner is required to pay, essentially the balance of remaining mortgage. In order to have the property sold, the mortgage lien must be paid in full. You don’t want to have to assume anyone else’s debt when you purchase a home, and the lien holder wants to get paid.
Equity
The equity in a home is the difference between what the home is currently worth, the value of the home (and property) and what remains on the mortgage. A home can have either positive equity, meaning that the home is worth more than what is owed on the home, or negative equity, in which the home is worth less than what remains on the mortgage lien.
Escrow
Escrow simply means when money is held by a person or organization until all of the conditions of a home sale are met, such as the payment of taxes that are due on the day of settlement. The money is held by a third party who is neutral in the sale.
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