Mortgage Terms Glossary (Simple Definitions + Helpful Facts)
Navigating the home buying process can feel like learning a new language. To help you feel confident, we have put together this 100% original glossary of common mortgage terms. We explain everything in plain English, so you can focus on finding your dream home instead of decoding bank jargon.
In this guide, we will cover the essential terms you’ll see on your loan estimate and monthly statements in 2026. From “Amortization” to “PITI,” this list is your quick-reference sheet for all things home finance.
Essential Mortgage Terms A-Z
This is the process of paying off your debt in regular installments over a set period. Each payment covers both the interest and a portion of the principal. You can learn more about How Amortization Works in our deep-dive guide.
While an interest rate tells you the cost of borrowing, the APR is a broader measure. It includes the interest rate plus other costs like broker fees and points. It gives you a more accurate picture of the total yearly cost of your loan.
An escrow account is a neutral “bucket” where your lender holds money for your property taxes and home insurance. Instead of you paying these big bills once a year, the bank collects 1/12th of the cost every month as part of your mortgage payment.
Equity is the difference between what your home is worth and what you still owe on your mortgage. As you pay down your principal, your equity grows. Think of it as the “cash value” you have built up in your property.
This is a loan where the interest rate stays exactly the same for the entire life of the loan. This makes it easy to know exactly How Mortgage Payments Are Calculated for your budget, as your “Principal and Interest” amount will never change.
Interest is the fee a lender charges you for borrowing money. It is usually expressed as a percentage. For a full breakdown of the difference between your debt and your fees, check out our article on What Is Principal and Interest?
PITI stands for Principal, Interest, Taxes, and Insurance. These are the four main components that make up your total monthly mortgage payment. Most homeowners pay all four in one single check to their lender.
If you buy a home with a down payment of less than 20%, lenders usually require PMI. This insurance protects the lender—not you—if you stop making payments. It is an extra monthly fee that can be removed once you have enough equity.
The principal is the original amount of money you borrowed. When you make a “Principal-Only” payment, you are attacking the debt itself, which reduces the amount of interest you’ll be charged in the future.
Quick Tip: Always look at the Loan Estimate form provided by your lender. It is a standardized three-page document that uses these exact terms to show you the true cost of your loan.
Takeaway: Mastering these few terms will make you more prepared than the average homebuyer when talking to banks or realtors.
At MortgageCalculatorFast.com, we believe that transparency is the key to a stress-free home purchase. You can learn more about our team on our About Us page.
Frequently Asked Questions (FAQ)
Your interest rate is just the base cost of the money. The APR includes the interest rate PLUS other fees like loan processing or “points.” If a loan has a low interest rate but a very high APR, it means the lender is charging you a lot of hidden fees upfront.
Closing costs are the fees you pay at the very end of the home-buying process. They usually include title insurance, appraisal fees, and taxes. They typically range from 2% to 5% of the total home purchase price.
Your “Remaining Principal” balance is listed on every monthly mortgage statement. It is also visible in your online banking portal. Knowing this number is essential for using our Home Page Calculator to see how much you can save by refinancing.
Still confused by a specific term? We’re here to help! Contact us if you have questions here.