FHA Loan and Mortgage Glossary - Terms Beginning with 'S'

  • Second Mortgage: This is when a borrower may take another mortgage on their home rather than refinancing their current mortgage. They may have great terms on their first mortgage and not want to refinance those terms. However, the borrower want to get some cash out of the equity of the home to do home improvements or to pay for a large expense so they get another small mortgage to accomplish their goals. The small mortgage may have a higher interest rate, but it is better to pay a higher rate on a smaller loan than to refinance the entire mortgage to a higher rate and lose a large amount of money over time in interest payments.
  • Secondary Mortgage Market: This is the market that exists to purchase mortgages from lenders for investment purposes. Freddie Mac is a secondary mortgage buyer that was established by the U.S. Government so that it would be easier for people to get mortgage loans because the lender would have the option of selling the loan rather than being stuck with it for the full term of the loan.
  • Seller Carry Back: This is when the current owner of the property will offer financing to the buyer in an agreement where the buyer usually assumes the mortgage loan after a period of time.
  • Servicing: This is the process of keeping the loan in good order by collecting mortgage payments, homeowners insurance, mortgage insurance, and property taxes from the borrower.
  • Settlement: This is the alternative name for the closing of the loan.
  • Settlement Costs: This is the alternative name for closing costs.
  • Simple Interest: The basic flat rate interest that is charged on the principal balance of a loan.
  • Special Forbearance: This is used by lenders when borrowers have special circumstances during which the lender agrees to suspend or reduce monthly mortgage payments for a certain length of time in order for the borrower to catch up financially so that they do not go into default and lose their home to foreclosure.
  • Subordinate: This is something that is in a lesser position than something else. For mortgages, the second mortgage loan is subordinate to the first mortgage loan in title to the property.
  • Survey: This is a document that is created to show the property boundaries and measurements of a parcel of land. This is done in order to make sure there are no encumbrances on the property.
  • Sweat Equity: This is when people build equity in their home through do-it-yourself improvements on the building or property. These improvements make the property more valuable and add equity to the home.