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Glossary A
Acceleration Clause
In the loan documents, a clause that gives the bank the right to ask for immediate repayment of the entire loan balance if the conditions of the mortgage, including payments, are not met.
Adjustable Rate Mortgage
A mortgage with an interest rate that goes up or down, depending upon a pre-selected index. The payments on an ARM fluctuate with the market as well. (Subject to certain pre-determined limitations called CAPS.)
Adjustment Period
The time between rate adjustments in an ARM.
Amortize
In Latin, meaning to “kill off.” To repay a loan by equal payments made periodically during a fixed period of time, including interest.
Amortization
The paying off of such a loan
Amortization Schedule
A payment schedule showing the dollar amounts that represent interest paid, principal paid and loan balance over the life of the loan.
Amount Financed
The loan amount borrowed, less the prepaid finance charges. This is found on the Good Faith Estimate. This is the figure on which the Annual Percentage Rate is calculated.
Annual Percentage Rate (APR)
The actual cost of a loan expressed as a yearly rate and calculated over the life of the loan. This is shown on the Truth-In-Lending. The APR is a calculation required by the Federal Government. It is not to be confused with the Note Rate. Charges used to calculate the APR include but are not limited to prepaid interest, points and origination fee.
Application Fee
An “up-front” fee charged by some lenders which is sometimes refundable and other times, non-refundable. Be cautious! The best way to go is NOT to pay any type of “application fee.”
Appraisal
An analysis of the current estimated value of the property in question based upon recent sales of similar properties in the same neighborhood. These are done by licensed individuals.
Appraisal Fee
A fee paid to the appraiser for his or her work. This is normally paid for by the borrower at the time of the application. A borrower should not be concerned if the lender asks for this fee in advance.
Appraiser
The licensed professional who completes the appraisal.
Appreciation
The increase in value of a property.
APR
See Annual Percentage Rate.
ARM
See Adjustable Rate Mortgage
Assessment
A local tax levied upon a piece of property for a specific purpose, such as sewers, schools and roads.
Assumability
A loan clause allowing the current loan to be transferred or assumed by another party, usually the buyer of the property. The conditions of the loan remain the same. Assuming a loan is subject to the lender’s approval.
Assumption
The act of assuming, or taking over another person’s loan.
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Letter A