Amortization - repayment of a boat loan through monthly installments of principal and interest; the monthly payment amount is based on a schedule that will allow you to own your home at the end of a specific time period (for example, 15 or 30 years).
ARM - Adjustable Rate Mortgage; a loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the Change in monthly -payment amount, however, is usually subject to a Cap.
Assumable mortgage - a boat loan that can be transferred from a seller to a buyer; once the loan is assumed by the buyer the seller is no longer responsible for repaying it; there may be a fee and/or a credit package involved in the transfer of an assumable mortgage.
Balloon Mortgage - a boat loan that typically offers low rates for an initial period of time (usually 5, 7, or 10) years; after that time period elapses, the balance is due or is refinanced by the borrower.
Cap - a limit, such as that placed on an adjustable rate mortgage, on how much a monthly payment or interest rate can increase or decrease.
Debt-to-income ratio - a comparison of gross income to housing and non-housing expenses.
Default - the inability to pay monthly payments in a timely manner or to otherwise meet the boat loan terms.
Delinquency - failure of a borrower to make timely payments under a boat loan agreement.
Discount point - normally paid at closing and generally calculated to be equivalent to 1% of the total loan amount, discount points are paid to reduce the interest rate on a loan.
Down payment - the portion of a boat's purchase price that is paid in cash and is not part of the boat loan.
Earnest money - money put down by a potential buyer to show that he or she is serious about purchasing the boat; it becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal.
Equity - an owner's financial interest in a boat; calculated by subtracting the amount still owed on the loan(s) from the fair market value of the property.
Fixed-rate mortgage - a boat loan with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change.
Foreclosure - a legal process in which mortgaged property is sold to pay the loan of the defaulting borrower.
Good faith estimate - an estimate of all closing fees including pre-paid and escrow items as well as lender charges.
Index - a measurement used by lenders to determine changes to the Interest rate charged on an adjustable rate mortgage.
Interest rate - the amount of interest charged on a monthly loan payment; usually expressed as a percentage.
Loan fraud - purposely giving incorrect information on a loan application in order to better qualify for a loan; may result in civil liability or criminal penalties.
Loan-to-value (LTV) ratio - a percentage calculated by dividing the amount borrowed by the price or appraised value of the boat to be purchased; the higher the LTV, the less cash a borrower is required to pay as down payment.
Lock-in - since interest rates can change frequently, many lenders offer an interest rate lock-in that guarantees a specific interest rate if the loan is closed within a specific time.
Margin - an amount the lender adds to an index to determine the interest rate on an adjustable rate mortgage.
Premium - an amount paid on a regular schedule by a policyholder that maintains insurance coverage.
Principal - the amount borrowed from a lender; doesn't include interest or additional fees.
Refinancing - paying off one boat loan by obtaining another; refinancing is generally done to secure better loan terms (like a lower interest rate).
Underwriting - the process of analyzing a loan application to determine the amount of risk involved in making the loan. It includes a review of the potential borrower's credit history and a judgment of the boat’s value.