Mortgage Glossary

Negative Amortization - 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 Worth - The value of all of a person's assets, including cash, minus all 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).

No-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.

Original Principal Balance - The total amount of principal owed on a mortgage before any payments are made.

Origination Fee - A fee paid to a lender for processing a loan application. The origination fee is stated in the form of points. One point is 1 percent of the mortgage amount.

Owner Financing - A property purchase transaction in which the property seller provides all or part of the financing.