Common mortgage terms

Real estate financing is serious business that requires some in-depth research. The commonest way to finance real estate is with a mortgage from a reputable source. In doing your research about the best mortgage options in Ghana’s real estate industry, it is not unusual to encounter strange words and unfamiliar expressions about mortgages. We’ve put together a list of some mortgage terms and what they mean to help you make informed decisions about mortgage agreements.

This is a two-part series with more mortgage terms coming in our next post! 

Adjustable-rate mortgage

This is a low-interest rate mortgage for a fixed number of years. Also known as an ARM, this kind of mortgage may last for three years, five years, seven years and even ten years. The interest rate for such a mortgage plan tends to fluctuate based on the prevailing market rates.

Annual percentage rate

The annual percentage rate allows home buyers to compare the cost of different mortgage plans. It consists of both the mortgage interest rates and any other costs attached to the loan. It may simply be referred to as an APR.


It is essential to know what you are going to be paying monthly to offset your mortgage debt. Amortization is the process that determines the payment you will be making monthly for the entirety of the loan period.


This refers to the act of appraising property to create a report that will be used to estimate the value of the property. The value is estimated by comparing properties with similar characteristics in the market.

Assumable mortgage

This is a type of loan whose terms can be transferred alongside a sold property to a new buyer.

Balloon payment

This refers to a final lump payment that is due at the end of a balloon type loan. This lump sum is usually larger than the previous payments made.

mortgage termsClosing Costs

There are a number of fees that arise when you close a home. These may include origination fees, underwriting fees, document preparation and many others. Closing costs can range between 2% to 5% of the total cost of the home.


A collateral is simply a piece of property pledged as security for a debt. This may even be a house that secures a second mortgage. Collaterals tend to get repossessed when the mortgage loan goes unpaid.

Construction Mortgage 

This is a type of mortgage that is used to finance the construction of a new home. The homeowner typically does not begin monthly payments until the house is complete. Instead, they pay the interest on the loan while the house is under construction and begin a full payment schedule when the home is complete.


This is a condition built into a house offer that allows a buyer or seller to get out of a purchase agreement without suffering any penalties. The condition might be something like the home inspection revealing major structural with the house.  


A deed is a document that transfers legal ownership of a house from one party to the other.

Down Payment 

This is the initial lump amount paid by the buyer to the homeowner. Ideally, a downpayment of 20% is preferred by most homeowners but some buyers will insist on paying 10% or less as a down payment.

Escrow: This is a third party account that holds funds for the contracting parties in a housing sale. Typically, when a person is under contract to buy a home, they usually deposit money into the escrow account until it’s time to close. After closing, the escrow account can hold the portion of a borrower’s mortgage payments that will pay their property taxes and homeowners insurance.

Equity: This refers to the percentage of the financial value of the house that a person has been able to pay off through their mortgage.

Fixed-rate mortgage: This is a type of mortgage where the scheduled loan payments remain the same for the lifetime of the mortgage. In such a situation, the interest rate remains fixed, unlike the adjustable rate.

So that’s it! This is part one of our two-part series on mortgage terms you need to know before entering into any mortgage agreements. Watch out for our next post with more mortgage terms and what they mean. Don’t forget to keep visiting Ghana’s no. 1 real estate marketplace for the best offers in houses for sale in Accra and houses for rent in Accra.