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REAL ESTATE

Adjustable rate mortgage (ARM)
Mortgage that features predetermined adjustments of the loan interest rate at regular intervals based on an established index
Annual percentage rate (APR)
Cost of credit expressed as an annual rate
Appraisal
Estimate of the property value or of the extent of damage by an authorized person; performed to determine the value of the property at the time of a loss
Debt ratio
Total debt divided by total assets; used by financial lenders as a rule of thumb to give a preliminary assessment of whether a potential borrower is already in too much debt
Default
Failure to make timely payment of interest or principal on a debt security
Escrow
Temporary monetary deposit with an independent third party by agreement between two parties; the escrow money is released when certain agreed conditions have been met
Federal Housing Administration (FHA)
Federal agency that insures residential mortgages
Fixed rate
Rate of interest that does not vary for the term of the loan or deposit
Household income
Combined gross income of all the members of a household who are 15 years old and older
Home equity loan
Line of credit secured by one's home; also known as equity loan or second mortgage
Lien
When a creditor has the right to sell the mortgaged or collateral property if one fails to meet the obligations of a loan contract
Mortgage loan
Consumer loan secured by residential real estate, usually the borrower's primary residence; may be used to purchase or refinance a home or property, with payments usually spread over 15 to 30 years
Points
Fee that mortgage lenders charge borrowers; considered a type of prepaid interest
Principal
Total amount of money being borrowed or lent; original amount invested, separate from earnings; ALSO face value of a bond
Refinancing
Revising a payment schedule, usually to reduce monthly payments (i.e. reducing interest rate on a mortgage)
Reverse mortgage
A special type of home equity loan for persons 62 and older; allows owners to convert some of the equity in their homes to cash; does not usually have to be repaid during the homeowner's lifetime; loan advances are not taxable and do not affect the homeowner's Social Security or Medicare benefits
Simple-interest mortgage
Mortgage where interest is calculated on a daily basis, as opposed to a traditional mortgage where interest is calculated on a monthly basis
Subprime loan
Type of loan that is offered at a higher interest rate than the rate offered on traditional loans; subprime borrowers are often declined by traditional lenders because of low credit ratings or other factors that suggest that they have a reasonable chance of defaulting on the loan
Title
Legal document or certificate showing ownership (i.e. a vehicle or house)