Common mortgage terms for new homeowners in Rhode Island

Here are some common mortgage terms you will see throughout your homeownership journey:

Amortization schedule: provides you with a list of equal loan payments calculated to pay off debt at the end of a fixed period, including accrued interest on the outstanding principal balance. You can obtain an amortization schedule of your mortgage loan through our Digital Servicing platform or by contacting our Customer Service Department. There may be a nominal fee for this service.

Adjustable-Rate Mortgage (ARM): a loan that has an interest rate that is adjusted periodically based upon a pre-selected index.

Condominium Association Fees: Condo Association fees should be paid by the homeowner directly to their condo association; these fees are not paid out of the escrow account.

Escrow Analysis: RIHousing holds the predetermined amount of real estate tax, insurance, and mortgage insurance that you pay each month in an escrow account until the taxes or insurance are due to be paid. Your escrow account will be reviewed annually.

Homeowners Insurance: pays for losses and damage to your property if something unexpected happens, like a fire or burglary. Your homeowner’s insurance may also cover the contents of your home and provide personal liability coverage. Standard homeowners’ insurance doesn’t cover damage from earthquakes or floods, but it may be possible to add this coverage.

Homeowners insurance also protects your lender’s financial interest in the property. Therefore, lenders require proof of homeowners insurance.

Choosing your insurance provider is up to you, if the provider is licensed and authorized to do business in Rhode Island, and the policy meets the property insurance requirements for your loan.

Loan assumption: is an agreement between the buyer and seller in which the buyer takes over (assumes) payment on an existing mortgage from the seller. Depending on your existing loan type, your mortgage may be eligible for assumption.

Loan prepayment: is an option contained in a loan which permits the borrower to make payments in advance of their due date.

Principal curtailment: is an unscheduled additional payment to the current outstanding loan balance. This additional amount may reduce the life of your loan. The account must be current for the curtailment to be allowed.

Real Estate Taxes: RIHousing receives real estate tax information directly from the city or town in which your home is located. We will collect monthly funds from you in the form of an escrow payment to pay your property taxes.

We do not collect money for or pay other local taxes, like sewer or water bills.  It is very important that your sewer or water bills are paid when they are due. Non-payment of these bills can lead to foreclosure.

Refinancing: is obtaining a new mortgage loan on a property already owned. RIHousing mortgage customers interested in refinancing their mortgage, may reach out to 401-457-1180 or 1-800-854-1180 for details and information.

Silent Seconds: a “second mortgage” usually for a down payment funds that are normally deferred until either the refinancing or sale of the property. Monthly statements are not created for these types of loans because there is no payment required on these loans.

Monthly Payments

Your monthly payment can be broken down into two parts:

1. P+I

This is the Principal and Interest portion of your payment, which represents the money you borrowed plus the interest owed.

2. Escrow

This is 1/12 of the amount that you owe for real estate taxes, insurance, and mortgage insurance.  Taxes and insurance premiums may change throughout the life of your mortgage, which can increase your monthly mortgage payment.

Homeowners Insurance

Homeowners Insurance protects you and your property from unexpected events, like a fire or a burglary. The first year of Homeowners Insurance is paid prior to or at your closing. RIHousing will then collect part of your premium each month and place it in your escrow account to pay the bill when it is next due. Homeowners Insurance must be maintained for your property.

After your closing you will need to contact your insurance company to provide your mortgage company with an updated policy that shows the mortgagee. This is the “mortgagee clause” that needs to be provided to your insurance company. For RIHousing custoemrs, this is:

Rhode Island Housing ISAOA, ATIMA
44 Washington Street Providence, RI  02903

If you choose to change your insurance carrier, it is important for you to notify RIHousing of the change and provide an updated policy from your new carrier.

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