•Acceleration Clause Allows the lender to speed up the rate at which your loan comes due or even to demand immediate payment of the entire outstanding balance of the loan should you default on you loan.
•Adjustable Rate Mortgage (ARM) A mortgage in which the interest rate is adjusted periodically, based on a pre-selected index. Also sometimes known as the renegotiable rate mortgage, the variable rate mortgage or the Canadian rollover mortgage.
•Adjustment Interval On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically one, three or five years, depending on the index.
•Amortization Means loan payment by equal periodic payments calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance.
•Annual Percentage Rate (APR) An interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows homebuyers to compare different types of mortgages based on the annual cost for each loan.
•Appraisal An estimate of the value of property, made by a qualified professional called an "appraiser."
•Assumption The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money. Since this is an existing mortgage debt, unlike a new mortgage where closing costs and new, possibly higher, market-rate interest charge will apply.
•Balloon (Payment) Mortgage Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract.
•Broker An individual in the business of assisting in arranging funding or negotiating contracts for a client, but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.
•Buydown When the lender and/or the home builder subsidizes the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.
•Caps (Interest) Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage may change per year and/or the life of the loan.
•Caps (Payment) Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.
•Closing The meeting between the buyer, seller and lender or their agents, where the property and funds legally change hands. Also called settlement.
•Closing Costs Usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The costs of closing are usually about 3 percent to 6 percent of the mortgage amount.
•Commitment An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions.
•Construction Loan A short term interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as the work progresses.
•Conventional Loan A mortgage not insured by FHA or guaranteed by the VA or Farmers Home Administration (FmHA).
•"Creative Financing" Creative financing plans typically include lower payments in the earlier years of the financing plan, interest rates that can change during the entire term of the loan, or some combination of these features. A method of finding the right combination of resources for your specific needs throughout the vast market of available financial resources.
