Mortgage Glossary
# A B C D E F G H I J K L M N O P Q R S T U V W X Y ZA
A clear title that is free of any liens or judgments. A clear title is normally required before a mortgage is granted.
Abstract of Title
A statement usually prepared by an attorney that traces the history of ownership of real property to determine the status of its present title, and includes all items of record that might impair the title, such as liens, charges or encumbrances.
Accelerated Amortization
The restructuring of an existing mortgage loan by increasing the monthly payments in order to pay off the loan in a shorter time than the original maturity.
Acceleration Clause
A clause commonly included in mortgages and bonds that gives the holder the right to demand the entire outstanding balance be paid in the event of default. Without this clause, the mortgagee may have to file separate foreclosure suits as each installment of the mortgage debt falls due and is in default.
Accrued Interest
Interest deemed to be earned on a security but not yet paid to the investor.
Acquisition Cost
The purchase price or appraised value of a property under an FHA loan, plus closing costs.
Adjustable Rate Mortgage (ARM)
A mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the change in monthly payment amount, however, is usually subject to a cap.
Adjusted Basis
The original cost of a property plus the value of any capital expenditures for improvements to the property, minus any depreciation taken.
Adjustment Date
The date on which the interest rate changes on an adjustable rate mortgage.
Adjustment Interval
Involves the time between changes in the interest rate and/or monthly payment on an adjustable rate mortgage (usually one, three or five years, depending on the index).
Amenity
A feature of the home or property that serves as a benefit to the buyer but that is not necessary to its use; may be natural (like location, woods, water) or man-made (like a swimming pool or garden).
Amortization
Repayment of a mortgage loan through monthly installments of principal and interest; the monthly payment amount is based on a schedule that will allow you to own your home at the end of a specific time period (for example, 15 or 30 years).
Amortization Schedule
A table indicating how much of each payment will be directed toward principal, and how much toward interest over the entire life of the loan; it also shows the gradual decrease of the balance of the loan.
Annual Percentage Rate (APR)
Calculated using a standard formula, the APR shows the cost of a loan; expressed as a yearly interest rate, it includes the interest, points, mortgage insurance, and other fees associated with the loan.
Annuity
Income payments of receipts spanning a number of years.
Application
The first step in the official loan approval process; this form is used to record important information about the potential borrower necessary to the underwriting process.
Application Fee
The borrower's fee to apply for a loan; does not guarantee that the loan will be approved.
Appraisal
Calculated using a standard formula, the APR shows the cost of a loan; expressed as a yearly interest rate, it includes the interest, points, mortgage insurance, and other fees associated with the loan.
Appraised Value
An opinion of a property's actual market value; based primarily on comparable sales, the appraisal is usually revealed at the purchase price.
Appraiser
A qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate.
Appreciation
The increase in the value of a property, resulting from changes in market conditions, inflation, or other causes.
APR (Annual Percentage Rate)
Calculated using a standard formula, the APR shows the cost of a loan; expressed as a yearly interest rate, it includes the interest, points, mortgage insurance, and other fees associated with the loan.
ARM (Adjustable Rate Mortgage)
A mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the change in monthly-payment amount, however, is usually subject to a cap.
Assessed Value
The value of a property as determined by a public tax assessor for taxation purposes.
Assessment
A local tax levied against a property for a specific purpose, such as a sewer or street lights.
Assessor
A government official who is responsible for determining the value of a property for the purpose of taxation.
Asset
Items of value owned by an individual. Assets that can be quickly converted into cash are considered 'liquid assets.' These include bank accounts, stocks, bonds, mutual funds, and so on. Other assets include real estate, personal property, and debts owed to an individual by others.
Assignment
When ownership of a mortgage is transferred from one individual or company to another.
Assignor
A person or institution from whom an agreement, contract or property is transferred to another.
Assumable Mortgage
A mortgage that can be transferred from a seller to a buyer; once the loan is assumed by the buyer the seller is no longer responsible for repaying it; there may be a fee and/or a credit package involved in the transfer of an assumable mortgage.
Assumption
An agreement between buyer and seller, whereby the buyer takes over the seller's payments on an existing mortgage. This can sometimes save buyers money, because a new mortgage may be subject to a closing cost and new, probably higher, market-rate interest rates.
Average Life
The average amount of time that will elapse from the date of MBS purchase until principal is repaid based on an assumed prepayment forecast. Alternatively, average life is the average amount of time a dollar of principal is invested in an MBS pool.
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