When you plan to take home loans, you will come across a number of terms that you may find difficult to understand. Your financial adviser or loan broker will discuss the loan and explain the terms to you. You can better communicate with them if you already have some knowledge of the terms yourself. This article aims to explain some of the most common terms used in mortgages.

Mortgage Term - The period for which you have to pay off the loan. It will be between 10 years and 30 years, but it can be more than that too. This is especially the loan period most people choose. For shorter loan terms, the interest rates will be low and for longer loan terms, there will be lower payments.

Rate - Your loan agent will talk about interest rate. It means that you pay the lender a certain amount of money every month. It has nothing to do with the principal amount which you have to pay when you have the cash. A number of things can affect your interest rate and if you have a high credit rating you can expect good rates.

Honeymoon Rate - There are lenders who will give you a discounted rate for a certain period of time. Once the period is over, you will have to pay the original interest rates.

Closing costs - This is something overlooked by most buyers, maybe because they are not fully aware of it. You have to pay a good amount as closing costs when you plan to close the account. There are some fees to be paid apart from the mortgage amount. You will have to discuss with your lender to know the estimate.

Acquisition cost - The above mentioned cost is also called acquisition cost. It will include the purchase price of the property without counting the closing costs. This is mandated under the FHA loan.

Adjustable Rate Mortgage (ARM) - The interest rate will vary depending upon the market conditions. You could pay less or you could pay more, the rates are variable.

Annual Percentage Rate (APR) - You will know about the mortgage rates annually paid. It will also depend on and actually include loan fees and additional costs. It will be spread throughout the mortgage period.

Breach of Contract - A contract will be drawn up before the lender agrees for the loans. If you violate the rules mandated in them, it is considered a breach.

Debt Service Ratio - Your lender will calculate your expense in relation to your income and a ratio is drawn up.

Early Repayment Penalty - If you want to repay your loan much before the agreed loan period, then the lenders charge a penalty.