Refinancing Your Home? Familiarize Yourself With These 4 Terms

Posted on: 19 October 2018

If you are planning on refinancing your home, and you don't know much about mortgages, the whole process can feel very overwhelming to you. Your loan officer may start throwing around some terms that you are unfamiliar with, which can have you reaching for your phone and searching for the answers to what they're talking about. Here are some common terms you'll need to know for your home refinance.

LTV Ratio

A term that you will frequently hear is the LTV, which standard for your loan-to-value ratio. It's calculated by taking the amount of money that you owe on the home and dividing by the amount that it was purchased for. You'll discover that many lenders have requirements about how much value you must have paid into your home in order to allow a refinance, and use the LTV ratio percentages as a guide.


When your mortgage lender starts mentioning HARP, know that they are not talking about the musical instrument. HARP stands for the Home Affordable Refinancing Program, and it's ideal for people that have a home without much equity.

Using HARP does have some requirements though, since not every homeowner is eligible. For instance, you must have more than 80% of your home's value left to pay off, not be behind on mortgage payments, and received the original loan within the past 9 years. This can be great for homeowners that had the real estate market flip and now their home is worth much less than what they paid for.


PMI stands for private mortgage insurance, and it's a requirement when you owe less than 20% of your home's value. It's a fee that you pay as part of your mortgage payment, and it can be waived if you provide a large down payment on the loan or cross that 20% threshold.

Origination Fees

You may be refinancing your mortgage, but you still have to pay an origination fee as part of the process. These are not charges that only apply to the original loan, as the name may incorrectly suggest. Origination fees are what mortgage lenders collect for their costs associated with refinancing your mortgage.

Do you feel like you're still struggling to understand the terminology associated with your home refinancing? If so, don't be afraid to reach out to a local mortgage lender. Their job is to help guide you through the entire refinancing process, and help answer questions that you have along the way.