Prepayment

Any amount paid to reduce the principal balance of a loan before the due date. Payment in full on a mortgage that may result from a sale of the property, the owner's decision to pay off the loan in full, or a foreclosure. In each case, prepayment means payment occurs before the loan has been fully amortized.

Prepayment Penalty

A fee that may be charged to a borrower who pays off a loan before it is due.

If you pay off your mortgage before it is due, you may be charged a fee -- this is referred to as a prepayment penalty.

Any amount that is paid to reduce the principal balance of a loan before the due date -- such as the sale of the property, the owner's decision to pay the loan in full, the owner's decision to pay additional money every month to lower the principle or interest -- is considered prepayment.

You may want to consider discussing the specifics of this fee as you negotiate the terms of your loan with your lender.

Prime Rate

The interest rate that banks charge to their preferred customers. Changes in the prime rate influence changes in other rates, including mortgage interest rates.

Principal

The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage.

One of the terms you're likely to hear when you talk about a mortgage with your lender is principal. The principal is the amount originally borrowed or the amount that remains to be paid once you have started making payments. It is also the part of the monthly mortgage payment that reduces the remaining balance of a mortgage.

The principal balance is the outstanding amount of principal on a mortgage; it does not include interest or any other charges.

Principal Balance

The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges.

Private Mortgage Insurance (PMI)

Also known as Mortgage Insurance, PMI is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require PMI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.

Promissory Note

A written promise to repay a specified amount over a specified period of time.

Public Auction

A meeting in an announced public location to sell property to repay a mortgage that is in default.

Purchase and Sale Agreement

A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

The Purchase and Sale Agreement is a written contract that is signed by the buyer and seller. It states the terms and conditions under which a property will be sold. It includes:

-- description of property,
-- price offered,
-- down payment,
-- earnest money deposit,
-- financing,
-- personal items to be included,
-- closing date,
-- occupancy date,
-- length of time the offer is valid,
-- special contingencies, and
-- inspection.