Reference · United States
Real estate glossary
The terms that decide what a sale actually costs you, defined without the circular industry phrasing. Where two terms get confused for each other — and several of these reliably do — the difference is stated rather than implied.
The money at closing
What actually changes hands on closing day, and the difference between the cash you receive and the gain you are taxed on.
Net proceeds
Net proceeds is the cash a seller actually receives at closing: the sale price, minus every cost of selling, minus whatever is still owed on the loan.
Net proceeds is the number that decides what you can do next — what you can put down on the next home, or what lands in your account if you are not buying again. It is the figure your settlement statement resolves to.
It is not a measure of how well the sale went. A seller with a large remaining loan and a seller who owns free and clear can sell identical homes for identical prices and receive completely different amounts, because net proceeds counts debt discharged as a subtraction.
Not the same as capital gain. Net proceeds is cash in hand. A capital gain is measured against what you originally paid, and the two can move in opposite directions.
Capital gain
A capital gain on a home sale is the sale price minus selling costs, minus your cost basis — the figure the IRS taxes, which is unrelated to how much cash you take away.
The confusion here is the defining error of this domain. Cash and gain answer different questions. A seller who bought cheap decades ago and has borrowed heavily against the home may receive very little cash and still owe tax on a large gain. A seller who bought at the top of the market and sells at a loss may receive a substantial check and owe nothing.
This is why a calculator that labels its output "profit" is quietly misleading you: it has no idea what you paid, so it cannot possibly be computing a gain.
Not the same as net proceeds. Two sellers can receive identical net proceeds and have wildly different taxable gains.
Cost basis
Cost basis is what a home cost you for tax purposes: the original purchase price, plus capital improvements, minus any depreciation you have claimed.
Basis is the input most sellers cannot produce on demand, because it is assembled over the years you owned the home rather than recorded in one place. A new roof, an addition, a replaced HVAC system — capital improvements raise your basis and therefore lower your taxable gain. Routine repairs and maintenance do not.
If you ever claimed a home-office deduction or rented the home out, depreciation reduces your basis, which raises the gain. Keeping receipts for improvements is the single highest-value piece of record-keeping a homeowner can do, and it is almost always discovered too late.
Settlement statement
A settlement statement is the itemized accounting of a closing, listing every debit and credit for both sides and the final amount each party pays or receives.
For most residential transactions the buyer receives a Closing Disclosure, and both sides commonly see an ALTA settlement statement prepared by the title or escrow company. Whatever it is called locally, it is the only authoritative source for what a closing actually cost.
Every estimate on this site, including ours, is an approximation of this document. When you have a draft of it in hand, use its numbers — not our defaults.
Underwater
A home is underwater when the mortgage payoff exceeds what the sale would yield after costs, meaning the seller has to bring cash to closing rather than receive any.
Negative equity is the same idea stated against the home value rather than against a specific sale. Being underwater does not stop a sale, but it changes who funds it: the shortfall has to come from somewhere before the lender will release the lien.
The alternatives when the cash is not available — a short sale, or staying put until the balance falls — carry consequences well beyond arithmetic, and are worth a conversation with someone qualified rather than a calculator.
Costs of sale
The line items that come out of a sale price between the contract and the wire. Most of them are local, and most of them are negotiable.
Closing costs
Closing costs are the fees and taxes charged to complete a transfer of ownership, split between buyer and seller according to contract and local custom.
There is no single national figure, and any source quoting one is averaging across jurisdictions whose rules barely resemble each other. What a seller pays in a transfer-tax state with customary seller-paid title insurance looks nothing like what a seller pays where neither applies.
This is why the calculators here take every cost as an editable input rather than asserting a rate. A default we cannot source is worse than no default at all.
Agent commission
Agent commission is the percentage of the sale price paid to the real estate brokerages involved, historically around 5–6% split between both sides.
The 2024 National Association of Realtors settlement changed how this works. Buyer-agent compensation is no longer advertised on the MLS, and is negotiated separately rather than assumed to come out of the listing side. In practice the total is more variable and more openly negotiable than older guidance suggests.
The consequence for anyone estimating a sale: use the figure in your own signed listing agreement. A rule of thumb inherited from before 2024 is describing a market that no longer exists.
Transfer tax
A transfer tax, sometimes called an excise or deed stamp tax, is charged by a state, county or city when a deed changes hands, usually as a percentage of the sale price.
The spread across the country is the widest of any line item on a settlement statement. Several states levy nothing at all. Some metropolitan areas stack a city tax on top of a county tax on top of a state tax, and a few apply a higher rate above a price threshold.
Because it is both large and entirely location-dependent, this is the one figure worth confirming with your county recorder or closing agent before you plan around any estimate.
Title insurance
Title insurance protects against defects in a home's ownership history — undisclosed liens, forged deeds, missed heirs — and is bought once with a single premium at closing.
There are two policies. The lender's policy protects the lender's interest and is required with any mortgage. The owner's policy protects the buyer's equity and is optional but customary.
Who pays for the owner's policy is decided by local custom rather than law, and the custom genuinely reverses between neighboring markets. In some places the seller pays it as a matter of course; in others the buyer does. It is negotiable in both.
Seller concessions
Seller concessions are credits a seller gives the buyer at closing, typically toward the buyer's closing costs or an interest-rate buy-down.
Concessions reduce a seller's proceeds exactly as a fee does, but they are rarely discussed as a cost because they are framed as a negotiating concession rather than a line item. They are frequently the mechanism by which a headline sale price is preserved while the real price falls.
They grow when rates are high, because a buy-down is worth more to a buyer than an equivalent price cut. Any estimate that ignores them will overstate what a seller receives in exactly the market conditions where accuracy matters most.
The loan
The mechanics of a mortgage, and the three different things people mean when they say they want to "pay it down".
Amortization
Amortization is the schedule that splits each mortgage payment between interest and principal, front-loading interest so that early payments barely reduce the balance.
The mechanic behind every question on this page: interest is charged on the balance outstanding, so when the balance is large almost all of a payment is interest. As the balance falls the split shifts, and it shifts slowly at first and then quickly.
This is why the timing of extra principal matters so much. A dollar paid against principal in year three removes interest from every one of the remaining payments; the same dollar in year twenty-five removes very little.
Mortgage recast
A mortgage recast re-amortizes the remaining balance over the remaining term at the existing rate, after a lump-sum payment toward principal, which lowers the monthly payment.
What a recast changes is the payment, and only the payment. The rate stays. The payoff date stays. There is no requalification, no credit check, no appraisal, and no closing costs beyond a processing fee that is usually in the low hundreds.
What it costs is subtle enough that most calculators omit it: recasting spends the benefit of your lump sum on a lower monthly payment rather than on finishing early, so you pay more total interest than you would by paying the same lump sum and leaving your payment alone. That is a legitimate trade, not a trap — but it should be made knowingly.
Recasting is generally available on conventional loans backed by Fannie Mae and Freddie Mac. FHA, VA and USDA loans generally cannot be recast. No servicer is obliged to offer it, so confirm before committing the money.
Not the same as refinance. Borrowers and servicer staff confuse these constantly. Ask for a recast by name, and say explicitly that you are not seeking a new loan.
Refinance
A refinance replaces an existing mortgage with an entirely new loan — new rate, new term, new closing costs, and a new qualification.
Because you requalify, a refinance depends on your credit, income and the appraised value at the time you apply, none of which matter for a recast. Because there are closing costs, it only pays when the rate improvement recovers them within the time you expect to keep the loan.
The short version: refinance to change your rate. Recast to change your payment. They are not alternatives to each other so much as answers to different questions.
Not the same as recast. A recast keeps your rate and cannot change it. Only a refinance can.
Principal
Principal is the amount still borrowed, as distinct from the interest charged for borrowing it — and a payment "toward principal" reduces the balance directly rather than covering the month's interest.
Extra principal has to be applied deliberately. Servicers do not always treat an overpayment as a principal reduction by default; some apply it to the next month's payment instead, which achieves nothing. Where the option exists, mark it explicitly and check the next statement.
Curtailment
A curtailment is a payment applied directly to a loan’s principal, over and above the scheduled payment — the word servicers print on statements for what borrowers call "paying extra".
Knowing the term is worth something practical: it is what you are asking for when you want an overpayment applied to principal rather than held against next month’s bill. A servicer that offers a "principal curtailment" option is offering exactly the thing most borrowers assume happens automatically and often does not.
A partial curtailment reduces the balance and shortens the loan while leaving the payment alone. Only a recast re-amortizes what is left into a smaller payment.
Payoff quote
A payoff quote is a servicer's statement of the exact amount required to clear a mortgage on a specific date, and it is always higher than the balance on your last statement.
The difference is interest accrued since the last payment, plus any recording or payoff-processing fee. Because interest keeps accruing, the quote is only valid through a stated date.
This catches sellers whose closing slips. A quote that expires before the wire goes out leaves a shortfall of a few hundred dollars that someone has to cover on the day. Ask for a quote good through a date comfortably past your expected closing.
Escrow
Escrow means two different things in a transaction: a neutral third party holding funds and documents until closing, and the account a servicer uses to collect property tax and insurance alongside your mortgage payment.
The second sense is the one that trips people up when comparing calculators. A quoted "monthly payment" of principal and interest is not the bill you actually pay if you escrow — taxes and insurance are added on top, and they change annually while your principal and interest do not.
A recast lowers the principal-and-interest portion only. Your escrow portion is unaffected, so the reduction in your total bill is smaller than the reduction in the calculated payment.
PMI
Private mortgage insurance is a premium charged on conventional loans with less than 20% down, protecting the lender rather than the borrower, and it can be removed once enough equity exists.
Under the federal Homeowners Protection Act, a servicer must automatically terminate PMI on most conventional loans once the balance reaches 78% of the original value, and must consider a borrower request at 80%. Both thresholds are measured against the original value, not a current one — reaching them via appreciation rather than payments usually requires a new appraisal and a servicer willing to accept it.
FHA mortgage insurance follows entirely different rules and, for most loans originated since 2013 with a low down payment, lasts the life of the loan. Refinancing out is the usual route.
Taxes
The federal rules that decide whether a sale creates a tax bill, and the local ones that decide what you settle up at closing.
Capital gains exclusion (Section 121)
Section 121 lets most homeowners exclude up to $250,000 of gain on a principal residence from federal tax, or up to $500,000 for a married couple filing jointly.
The general test is ownership and use: you must have owned the home and lived in it as your principal residence for at least two of the five years before the sale. The two years need not be continuous, and the exclusion can generally be used once every two years.
These thresholds are not indexed to inflation and have not moved since 1997, which is why long-held homes in appreciated markets increasingly produce gains above the limit. Partial exclusions exist for sales forced by a change in employment, health, or certain unforeseen circumstances.
This is genuinely a question for a tax professional rather than a calculator. The rules around rental use, inherited basis and non-qualified use are where real money is won and lost.
Property tax proration
Property tax proration divides the tax year between seller and buyer at closing, so each pays for the portion of the year they owned the home.
Whether this appears as a debit or a credit on your side depends on something most sellers never think about: whether your jurisdiction bills in arrears or in advance. Bill in arrears and the seller owes the buyer for time already elapsed. Bill in advance and the seller has already paid for time they will not own the home, and gets money back.
Both are normal. Which one applies is a local fact, and it is the reason a seller in one state sees a deduction where a seller in another sees a credit for the same situation.
Put a number on it
Definitions only get you so far.
Knowing what a term means is the first half. The calculators put your own figures against it and show every line, so you can see which of these actually moves your number and by how much.