Glossary – P

A B C D E F G H I J K L M N O P Q R S T U V W XYZ

P

Packager
The leasing company, investment banker, or broker who arranges a leverage lease.

Participation
A type of mortgage where the lender receives a percentage of the gross revenue in addition to the mortgage payments.

Partnership
Can be general or limited, but in either case the general partners are in control. The tax burden is shared by all the partners at their personal rate, and the general partners have unlimited liability. Limited partners have limited liability.

Payment Change Date
The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date occurs in the month immediately after the adjustment date.

Periodic Payment Cap
A limit on the amount that payments can increase or decrease during any one adjustment period.

Periodic Rate Cap
A limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.

Permanent Loan
A long term mortgage, usually ten years or more. Also called an “end loan.”

Pledged account Mortgage (PAM)
Money is placed in a pledged savings account and this fund plus earned interest is gradually used to reduce mortgage payments.

Points (loan discount points)
Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount (e.g., two points on a $100,000 mortgage would cost $2,000).

Power of Attorney
A legal document authorizing one person to act on behalf of another.

Pre-Approval
The process of determining how much money you will be eligible to borrow before you apply for a loan.

Prepaid Expenses
Necessary to create an escrow account or to adjust the seller’s existing escrow account. Can include taxes, hazard insurance, private mortgage insurance and special assessments.

Prepayment
A privilege in a mortgage permitting the borrower to make payments in advance of their due date.

Prepayment Penalty
Money charged for an early repayment of debt. Prepayment penalties are allowed in some form (but not necessarily imposed) in many states.

Present Value
The current equivalent of payments or a stream of payments to be received at various times in the future. The present value will vary with the discount interest factor applied to future payments.

Primary Mortgage Market
Lenders, such as savings and loan associations, commercial banks, and mortgage companies, who make mortgage loans directly to borrowers. These lenders sometimes sell their mortgages to the secondary mortgage markets such as to FNMA or GNMA, etc.

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

Principal Balance
The outstanding balance of principal on a mortgage not including interest or any other charges.

Principal, Interest, Taxes, and Insurance (PITI)
The four components of a monthly mortgage payment. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the monthly cost of property taxes and homeowners insurance, whether these amounts that are paid into an escrow account each month or not.

Private Mortgage Insurance (PMI)
In the event that you do not have a 20 percent down payment, lenders will allow a smaller down payment – as low as 3 percent in some cases. With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance. Private mortgage insurance will usually require an initial premium payment and may require an additional monthly fee depending on your loan’s structure.

Prime Rate
An artificial rate set by commercial banks. Many banks will use the Wall Street Prime rate. This is a rate set by the top leading banks in the country.

Pro forma financial statements
Financial statements for a business where certain amounts shown are hypothetical, or estimated, for the period depicted.

Producer Price Index (PPI)
The monthly producer price index measures the level of prices for all goods produced and imported for sale in the primary marketplace. Increase in the PPI tends to lead other measures of inflation. Bond Market Moves Down In Price.

Profit
Compensation an entrepreneur receives for the assumption of risk in a business venture. Also called net income.

Profit and loss statement
Summary of the revenues, costs, and expenses for a business over a period of time. Also called the income statement.

Property Classification
Most lenders will classify a property by its age and needed maintenance. As an example many insurance companies will only loan on properties that are class A, meaning that the properties age is 10 years old or less and is not in need of repair.

Put Option
The requirement to purchase equipment at a particular time and at a predetermined price. In a lease transaction, this is a lessor’s right to force the lessee (or some third party) to purchase the equipment at the end of the lease term. IRS guidelines prohibit put options in tax-oriented leases.