Rate Caps

Lenders offer caps with their adjustable rate mortgages (ARMs) so you can have more control over your monthly mortgage payment. Usually, there are two types of rate caps:

• A per-adjustment cap, which specifies the most your interest rate can rise from one adjustment period to the next,
• and a lifetime adjustment cap, which specifies how much your interest rate can rise over the life of your loan.

Ask your lender about both caps when evaluating any ARM product.

Rate Lock

A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time. See lock-in.

Ratified Sales Contract

A ratified sales contract means both the buyer and the seller have signed off on the final offer. It also acts as a starting point for the loan application interview.

The ratified sales contract specifies the amount of your down payment, the price you will pay for the house, the type of mortgage financing you will seek, your proposed closing and occupancy dates, and other contingencies.

You will give all this information to your loan officer when you meet to discuss your financing options.

Real Estate Settlement Procedures Act (RESPA)

A consumer protection law that requires lenders to give borrowers advance notice of closing costs.

Recission

The cancellation or annulment of a transaction or contract by the operation of a law or by mutual consent. Borrowers usually have the option to cancel a refinance transaction within three business days after it has closed.

Refinance Transaction

The process of paying off one loan with the proceeds from a new loan using the same property as security.

Remaining Balance

The amount of principal that has not yet been repaid.

• Also see "Principal Balance" entry

Remaining Term

The original amortization term minus the number of payments that have been applied.

Repayment Plan

An arrangement made to repay delinquent installments or advances. Lenders' formal repayment plans are called "relief provisions."