Glossary of Terms

Acceptance
The agreement a buyer or seller enters into upon signing a contract which is binding by the terms of the offer.

Acceleration
The lender has the right to demand immediate payment of the outstanding mortgage loan balance if the borrower defaults on the terms of the loan, or the lender may execute the right stated in the Due-on-Sale Clause.

Account termination fee
A fee that is charged if you pay in full and terminate your home equity line of credit during the first five years. Payment down to a zero balance does not count as termination.

Additional principal payment
A payment made by a borrower of more than the scheduled principal amount due, in order to reduce the outstanding balance on the loan, to save on interest over the life of the loan and/or pay off the loan early.

Adjustable Rate Mortgage (ARM)
A home loan whereby the lender may adjust the interest rate periodically during the life of the loan based upon changes in a specified financial index.

Adjustment date
The date on which interest rate changes take place for an adjustable-rate mortgage (ARM).

Adjustment period
The period of time between adjustment dates for an adjustable rate mortgage (ARM).

Amortization
The gradual repayment of a home loan by periodic installments which includes accrued interest on the outstanding balance of the loan.

Amortization Schedule
A timetable for payment of a home loan. An amortization schedule shows at a glance the amount of each payment that is applied to interest and to principal and shows the remaining balance after each payment is made.

Amortization Term (period)
The amount of time it takes to pay off a loan, expressed as a specific number of months. For example, the amortization term is 360 months for a 30 year fixed rate loan.

Amortize
The repayment of a loan with regular payments that include both principal and interest.

Annual Percentage Rate (APR)
The full cost of a home loan stated as a yearly rate including such items as interest, mortgage insurance, most closing costs, discount points and loan origination fees.

Application
A form providing pertinent information about a prospective borrower's, income, assets, debts, employment and other financial information, as well as the purpose of the home loan, and information about the property securing the home loan.

Appraisal
A written assessment of the value of a property prepared by a qualified appraiser. Not to be confused with a home inspection.

Appraised Value
A property's estimated fair market value, based upon an analysis of the property by a qualified appraiser and values of comparable properties in the area.

Appraiser
A person qualified by education, training, and experience to estimate the value of real property.

Appreciation
An increase in the value of a property due to changes in market conditions or other causes. Inflation, increased demand, home improvement, and sweat equity are all causes of appreciation. The opposite of depreciation.

Assessed Value
The value used to determine property taxes, based on a public tax assessor's opinion. Contrast with appraised value.

Assessment
The amount of tax due to local government. May also refer to the amount due to local government or to common owners of a property (e.g., a homeowner's association) for a special payment to cover expenses for improvements or maintenance, such as new sewers or roads.

Asset
Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).

Assignment
The method of transferring a right or contract, such as the terms of a loan, from one person to another. Assumable loan A home loan that allows a new purchaser of the home to take over ("assume") the loan obligations of the seller when a home is sold.

Assumption
The buyer's acceptance of liability for the seller's existing home loan whereby the buyer takes over the payments on the existing property mortgage.

Assumption Clause
A provision in an assumable loan that allows a buyer to assume responsibility for the home loan from the seller. The loan does not need to be paid in full by the original borrower (seller) upon sale or transfer of the property.

Assumption Fee
The fee paid to a lender (usually by the buyer) for the lender's agreement to start collecting payment from the buyer instead of the original borrower (seller).

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