Glossary of Terms: P

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Payment Cap:
A contractual limit as to how much the monthly payment on an adjustable rate mortgage (ARM) may increase, regardless of how much the interest rate increases.

PITI:
Acronym for items included in the monthly mortgage payments (Principal, Interest, Taxes and Insurance.)

Planned Unit Development (PUD):
A development that is planned and designed as one entity. Most have a shared common space which is owned and managed by the homeowner’s or neighborhood associations.

Point:
An amount equal to one percent of the principal loan amount. These points can be paid to a lender at closing to lower the interest rate on your loan. Also referred to as discount points

Prepayment Penalty:
A penalty charged by the lender for early repayment of debt. Not all loans have prepayment penalties.

Prequalification:
The process of evaluating a borrower’s financial and other information (proposed collateral, employment history) to determine the how much the individual can borrow and under what terms.

Prime Rate:
The interest rate that banks charge to their best customers. It can be used for home equity lines of credit and for adjustable rate mortgages. Good credit history is one of the more important factors in prime borrowing.

Private Mortgage Insurance (PMI):
Insurance that protects lenders against loss if the borrower defaults on the loan. This is paid by the borrower and usually required when the down payment is less than 20 percent. Also known as Mortgage Insurance (MI.)

Property Tax:
A levy by a state or local government based on the appraised value of your home that is used to fund municipal services, such as schools, street maintenance or police.