Glossary and Acronyms "P"

Portfolio manager

The individual, team or firm making the investment decisions for an investment fund, including the selection of individual investments.

Portfolio turnover rate

A measure of how frequently investments are bought and sold within an investment fund during a year. The portfolio turnover rate is usually expressed as a percentage of the total value of an investment fund.

Power of Attorney

An instrument granting someone authority to act as agent or attorney-in-fact for the grantor. An ordinary Power of Attorney is revocable and automatically terminates upon the death or incapacity of the principal.

Preapproval

A lender’s conditional agreement to lend a specific amount of money to a homebuyer under a specified set of terms. (Ref: Six Stages of a Home Loan)

Prearranged refinancing agreement

A formal or informal arrangement between a lender and a borrower where the lender agrees to offer special terms (such as a reduction in the rate or closing costs) for a future refinancing as an inducement for the borrower to enter into the original mortgage transaction.

Preliminary Title Report

A report prepared prior to issuing a policy of title insurance that shows the ownership of a specific parcel of land, together with the liens and encumbrances thereon which will not be covered under a subsequent title insurance policy.

Prepaid expenses

The expenses that are usually paid in advance, such as escrow for taxes and insurance (which are paid at closing).

Prepaid interest

Interest collected at closing of a first mortgage, covering the period from the date of disbursement to the start of the next payment period.

Prepayment

An amount paid to reduce the principal balance of a loan before the principal is due.

Prepayment penalty

A penalty assessed by some lenders if a loan is paid off before the specified term. This is a lump-sum amount due and payable in addition to the loan balance, and is usually limited to the early years of a mortgage. 

Prequalification

The process of providing financial and other information (such as employment history and proposed collateral) by a prospective borrower in order for the lender to preliminarily estimate how much the borrower may obtain for the purchase of a home. A pre qualification is not a commitment to lend. (Ref: Six Stages of a Home Loan)

Predatory Lending

Unscrupulous actions carried out by a lender to entice, induce, and/or assist a borrower in taking a mortgage that carries high fees, a high interest rate, strips the borrower of equity, or places the borrower in a lower credit rated loan to the benefit of the lender. (Ref:  What is Predatory lending and steering?) 

Prime rate

The interest rate that banks charge their best customers when lending them money. The U.S. Prime Rate, as published daily by The Wall Street Journal, is based on a survey of the prime rates of the 10 largest banks in the United States. The U.S. Prime Rate is used by some financial institutions to calculate variable interest rates for credit cards. Changes in the U.S. Prime Rate influence changes in other rates, including mortgage interest rates.

Primary Mortgage Market

The national market in which mortgages are originated. (Ref: What is "Primary mortgage market"?)

Principal

The amount of a debt, investment, or other fund, not including interest, earnings or profits.

Principal & interest

The principal is the amount of money borrowed on a loan. The interest is the charge paid for borrowing money. Principal and interest account for the majority of your mortgage payment, which may also include escrow payments for property taxes, homeowners insurance, mortgage insurance and any other costs that are paid monthly, or fees that may come due.

Principal, Interest, Taxes, and Insurance (PITI)

The components of a monthly mortgage payment.

Principal balance

The unpaid portion of the loan amount. The principal balance does not include interest or any other charges.

Principal payment

Portion of your monthly payment that reduces the principal balance of a home loan. This term also refers to prepayments you make to the principal balance.

Profit and Loss Statement

A financial statement that summarizes the revenues, costs, and expenses that a business incurred during a given period.

Processing fee

A fee charged to cover the administrative costs of processing a loan request. (Ref: What are Permissible fees and finance charges?) 

Promissory note

A written promise to repay a specified amount over a specified period of time.  (Ref: Promissory Note)

Property Tax

A tax levied on the owner of the property. The tax is based on the property's value. Local governments often impose property taxes to finance districts, municipal projects etc.

Prospectus

The official document that describes certain investments, such as mutual funds, to prospective investors. The prospectus contains information required by the SEC, such as investment objectives and policies, risks, services and fees.

Provider / Record keeping expenses

These expenses are a combination of various charges. Also known as an asset management charge (AMC) or wrap charge.

Purchase / Sales Agreement

A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Purchase Money Mortgage (PMM)

A Mortgage that a buyer gives the seller when the property is conveyed to secure the unpaid balance of the purchase price.

P/E ratio

The price of a stock divided by trailing 12-month earnings per share.

Portfolio

A collection of investments, such as stocks and bonds owned by an individual, organization or investment fund.

Pooled guaranteed investment contract (GIC) fund charges

Charges for a common, fixed income investment option. Includes a number of contracts issued by an insurance company or bank that pays an interest rate. Charges include investment management and administrative fees.