Mortgage Glossary: A - E

 

• Glossary:
• A - E
• F - O
• P - Z

• Adjustable-Rate Mortgage (ARM): This is a mortgage in which the interest rate changes periodically. The rate increase does have a cap in most cases.
• Amortization: A payment schedule that reduces the debt gradually through payments of principal and interest combined. This schedule is usually done with monthly payments.
• APR: Stands for Annual Percentage Rate, which is the total cost or finance charge for a loan per year, including interest and other costs associated with the loan.
• Assets: Everything that is owned by an individual (or corporation) that has monetary value or can be used as repayment of debts.
• Balloon Loan: This is a loan in which the monthly payments do not fully pay off the loan, and where a lump sum is due at a predetermined date. When combined with the monthly payments this lump sum pays off the remaining principal.
• Bankruptcy: The legal state of being unable to repay ones debts, leading to the petitioning of the courts to either restructure the debts or for liquidation of the bankrupt individual's assets. Filing for bankruptcy can have a serious negative impact on ones credit.
• Borrower: The person receiving the loan, who is responsible for paying off the loan in full.
• Closing Costs: When transfer of ownership occurs between a buyer and seller expenses are incurred. These costs include prepaid items, lender fees, recording fees, title charges and escrow.
• Closing: The final step in the sales process, after which the rights of ownership are transferred from the seller to the buyer.
• Convertible Adjustable-Rate Mortgage: This is a mortgage which starts out as an ARM, but which allows for the borrower to convert to a fixed rate mortgage, as long as they do so within a specified period of time.
• Credit Report: This is a report generated by a credit bureau, compiled from information that was gathered from banks, merchants, and other financial sources detailing a persons credit history. The credit report can be used in determining whether or not a particular individual is credit worthy enough to receive a loan.
• Debt Consolidation: The financial strategy of combining multiple loans into a single loan, often times resulting in a lower overall monthly payment, but with a longer loan term. A debt consolidation loan can be especially helpful if it results in lower interest rates for the borrower.
• Earnest Money: A deposit used to demonstrate that the buyer is serious about the purchase, as a sign of good faith. The deposit is forfeited by the donor if they fail to meet the terms of the contract or agreement.
• Entitlement: The legal rights someone has to a particular benefit or program, such as the VA home loan program.
• Equity: The difference between the current market value of a particular piece of property, and what is still owed on it.
• Escrow: money that is added to an account each time a mortgage payment is made and is then used to pay insurance and property taxes.