Need more information? Enjoy the largest mortgage glossary on the internet. Over 1500 mortgage dictionary terms explained in plain English.

Amortization / Amortization Period / Amortization Term

The time it takes to pay off a mortgage.

Amortization is the process of gradually reducing principal(total amount borrowed) with partial payments. Amortization period can range from 5 to 40 years.

Amortization Schedule

A complete schedule of mortgage payments which specifies: monthly payments, interest rates applied to the monthly payments, principal reduction, total interest and final balance. You can use our amortization schedule calculator to produce your own table.

Amortization Table

Amortization table is a formula used to calculate interest rate, monthly payments and a term, based on the amount borrowed.

Annual Percentage Rate / APR

Rate quoted to the borrower that includes: points(broker commissions), interest rates, fees, insurance and other costs. Lenders are required by law to provide annual percentage rate. APR lets people know the bottom line, with all the costs included.

Abandonment

Abandonment occurs when owner leaves the property and refuses to pay the mortgage. Lender can sell the property in order to recover the money.

Abstract of Judgment

A judgment made in lawsuit, where the court states how much money a person who lost the case owes. The amount includes: court costs, rate of interest and any other amounts(damages to the winning party). The purpose of Abstract of Judgment is to create legal record and make a lien or a claim on real estate property owned by the defendant in the case he refuses to pay it out.

If a lawsuit loser refuses to pay the amount owed, the winner can get legal assistance in obtaining property and selling it.

Abstract of Title

A brief history detailing a piece of land or real estate. It includes details such as: mortgages, wills, taxes, liens, previous owners, court papers and other documents.

Acceleration Clause

An agreement which gives lender a right to demand a payout on the total amount borrowed. For example, acceleration clause may state that Kate must pay out full amount owed if she decides to sell her house without notifying her lender.

Accelerated depreciation

Depreciation method, used for accounting purposes, that offers bigger deductions in early life years of a property.

Acceptance

Act of accepting a buying offer on a property. Example: Renata is selling a house. Ivan makes an offer and Renata accepts it. Written approval follows suite.

Account Agreement

Account agreement is a set of conditions between an individual and a bank that specify rights of both parties to an account. Account Agreement must be signed by a person opening an account.

Accredited Mortgage Professional

Individual who is professionally trained and educated to deal with mortgages. Mortgage professionals handle paperwork and usually work for a commission. They may work for borrowers, or for lenders. Commonly referred to as mortgage broker.

Accrual Method

Accrual method is the most commonly used accounting method. With accrual method, profits are recorded as soon as the products or services are sold, regardless whether actual money were received. For example, GNB company sold a number of printers to a client under a credit. While the actual money will be received in future, accrual method records it as “money already received”. The same can be applied for expenses, if GNB company buys new inventory under credit, without paying for it instantly, the expenses will be recorded as “money already paid”.

Accrued Interest

Interest which has been accumulated, but not paid out.

Acquisition Fee

Some lenders may charge a fee on an original loan which includes costs and commissions for participating parties. In most cases acquisition fee will not be specified in a written contract, but automatically included in monthly payments. 

Acquisition Cost

The total cost of buying property, including land transfer taxes, commissions and other expenses involved.

Acquisition Indebtedness

Acquisition indebtedness includes all the debt money spent on a piece of property, including mortgage and other borrowed expenses. For example, if you bought a house with a mortgage and also borrowed money for renovation from a separate credit line, total amount spent together with a mortgage will constitute acquisition indebtedness.

Acre

Acre is a unit of area measurement. 1 acre is equal to 4046.8 square meters or 0.40 of a hectare.

Acreage

Land measured in acres.

Act of God

Legal speak for a catastrophic event(hurricane, flood, earthquake) that damaged property.

Actual Age

Refers to an age of a building since its completion, not the start of construction.

Accelerated Depreciation

Tax deduction method that allows the owner to deduct more taxes in the early years of property life.

Add-on Interest

Add-on Interest refers to the interest which is added on top of the overall mortgage figure.

Example : Ivan lends Cathy a $1000 for 5 years at 6% interest rate, but demands that she adds a $50 to it as soon as she borrows the money. Total amount she borrowed with add-on interest is $1050, but she only got a $1000, since $50 is add-on interest.

Addendum

Addition, change, revision or attachment to the contract.

Additional Principal Payment

Additional payment on top of regular monthly payments or a separate sum paid to reduce the principal.

Additional Security Fee

Fee paid to secure lender if borrower defaults. It is usually paid when borrower reaches 75% of the principle. 

Adjustable Rate / AR

An interest rate which adjusts according to the market, outside of lender’s control. Adjustable rate is usually tied to a financial index such as LIBOR(London Interbank Offered Rate).

Adjustable Rate Mortgage / ARM / Variable Rate Mortgage / Floating Rate Mortgage

Adjustable Rate Mortgage is a mortgage with an adjustable interest rate. The interest rate is adjusted in predetermined intervals of time, according to the mortgage plan(every month, every 2,3,4,6 months, every year.). The interest rate may go up and down and is determined by the market(economy).

For example: I have a $100.000 adjustable rate mortgage that adjusts every six month. My initial interest is 6%, but after six months it adjusted to 5.98%. It will stay like that for 6 month and adjust again.

In order to secure against overly high interest rates, lenders offer caps. Caps set maximum limits on interest rates. For example, if I have 6% rate, my cap may be 9%, meaning no matter the market, my rate will no be higher then 9%

Adjusted Balance

A number of financial institutions use adjusted balance for applying charges. A credit card company subtracts monthly payments and adds charges to the remaining balance.

Adjusted Basis / Adjusted Cost Basis

Calculation designed to determine loss or profit from the sale of real estate property. To calculate adjusted basis you must know the original amount paid, cost of renovation and other expenses that added value to the property. From that amount you subtract deductions such loss of value and depletion.

Adjustment Period / Adjustment interval

Adjustment period is the time interval between interest rate adjustments in a variable rate mortgage. For example, in an adjustable rate mortgage with adjustment period of six months, interest rates will change every six months.

Adjustment Date

Adjustment date is the date of interest rate changes in an adjustable rate mortgage.

Adverse Possession

A person or a number of people who get ownership of the property by living on it for a certain amount of time.

Adverse Use

Use of property without permission of the owner. Adverse use may be followed and punished by legal authorities.

Adverse Credit / Adverse Credit History

Adverse Credit simply means bad credit history. Bad credit may happen when borrower does not pay monthly dues in time or does not pay them at all. Specialized agencies such as Equifax determine credit rating. Visit Equifax Website. http://www.equifax.com/home/

Administrator's deed / Administrators deed

Legal document that administrator of the property uses to transfer rights to that property. Administrator’s deed is required when owner of the property dies without a Will (a legal document that specifies distribution of assets upon person’s demise).

Affiant

Individual who makes a sworn statement.

Affidavit

Affidavit translates from Latin: “has pledged his faith”. Affidavit is a sworn statement which must be witnessed by legal or public authorities. Affidavit is sometimes required for a mortgage. 

Affinity Card

Affinity card is a type of credit card, where percentage from each sale goes to non profit charities or non profit organizations. Affinity card holders are usually entitled to benefits from those organizations.

Affirmation

Affirmation is the substitute to Affidavit (sworn statement), where person in affirmation is bound by legal oath. For example, I affirm that I will pay out mortgage on monthly basis or face foreclosure (transfer of property to lender due to non payment).

Agency

Agency is the entity that represents the client. In a mortgage world, there are three types of agencies. Ones that represent lenders, ones that represent borrowers or both, mixed together.

Agency Closing

The use of agency for closing supervisions. In a mortgage transaction up to two agencies may be involved. One that represents a borrower and one that represents a lender, where both supervise the transaction in the best interests of the party they represent.

Agent

Representative of an agency.

Agreed Boundary

Agreed boundary is a boundary between two neighboring properties. In an event when neighbors dispute their property boundaries, they may agree on one that satisfies both parties. This may involve legal authorities, as the agreed boundary must be officially recorded to prevent future disputes.

Agreement in Principle

An agreement in principle is the agreement between a borrower and a lender, where lender guarantees a mortgage before borrower goes shopping for a house. Essentially, borrower gets a mortgage before buying a house. Lenders require credit check and confirmation of the amount to be borrowed. 

Alienation clause

A demand for a full mortgage payout upon transfer of the property to another owner. For example, if I sell my house, alienation clause will require me to pay out full amount owed to the lender.

Alt-A mortgages / Alternative Documentation Loans

Classification of mortgages, where borrowers have clean credit histories, but cannot provide proof of regular income. Some business owners may fall into that category or freelance workers who do not have fixed work place. Alt-A loans have higher interest rates than regular mortgages.

Allowance / Allowances

Allowances are budgets dedicated to a certain amount of work or a certain amenities and may include flooring, landscaping, custom driveway etc.

Advance

To draw from a pre approved line of credit, which in mortgage context is secured by home equity(home equity loan).

Alternative Mortgage

A type of mortgage that is not standard fixed rate mortgage. Alternative mortgage is a tern rather then a type of mortgage and can applied to: Adjustable Rate Mortgage, Home Equity Loan, Reverse Mortgage, etc.

Alternative Documentation

Alternative Documentation is a type of loan documentation, where assets, income, banks statements etc., are documented, as opposed to sending borrower statements to third parties for verification.

Annual Mortgagor Statement

A report that is sent to the borrower at the end of each year. It details total amount paid, total interest paid, monthly payment details and remaining mortgage balance.

Amenities / Amenity

Non monetary benefits delivered by real estate property. For example, a house on a lake will usually cost more then an identical house 5 kilometers from the lake.

Annuity

Annuity are payments made by an insurance company to the insurance holder for specified periods of time.

Appraisal Fee

Appraisal Fee is a fee charged for appraisal services.

Anticipatory Breach

Breaking contract before the end of its terms. Once a contract is broken by one party, another party gets notified.

Appraisal / Appraisal Services

Appraisal is an audit of a property. Appraisal is done to estimate value of the property, possible selling price as well as for taxation estimates.

Appraisal Report

A report produced by an appraisal company or an appraisal officer which details the conditions of the property and estimates its value.

Appreciation

An increase in value of property. Appreciation may be caused by: inflation, land demand, renovations, add-ons and other factors that add value to the property. Appreciation may be also caused by factors such as: lowered crime rate, overall neighborhood improvements, natural neighborhood decorations (trees) and rising market prices for real estate property. 

Appraised Value / Appraisal Amount / Mortgage Valuation

Estimated value of the property by an appointed appraiser(person conducting property audit).

Appraiser

Person conducting property audit to determine its value or to estimate taxation rates. Appraiser may be a real estate professional or a municipal officer.

Application

Document filled out by the borrower when applying for a mortgage.

Applicant

Person applying for a mortgage.

Arbitration

A method of resolving disputes between two parties, through third party representation. Third party must be accepted by both sides in a dispute. Third party comes up with a solution which two conflicting parties are bound to accept. We can take the analogy of a kindergarten, where two kids are fighting over toys, while their supervisor comes in and says: “this is how it’s going to be”. Kids accept it a go their ways. The only difference in arbitration is that kids must pick their supervisor and must both agree they will do what he says.

Arrears

Arrears is the interest paid on mortgages at the end of a term. For example, at the end of a month, at the end of 6 months, at the end of a year, etc.

Arrangement Fee

Fee charged on top of a loan to cover brokerage services. For example, if you borrowed $300.000, broker may add $2000 dollars on top of that mortgage as his commission.

Arpent

Arpent is a French unit of measurement. Arpent equals to 0.845 acres. 1 acre = 4046.85 square meters.

As-is condition / As is condition

Property being sold in its current state. This may happened due a number of factors such as: owner being in a hurry, no money for renovation/fixes, owner does not feel like doing it. Selling property in “as-is condition” can depreciate its value up to 30%, so investing in repairs and renovations is a good idea. 

Asbestos

Fire resistant, chemically made material. It is no longer in use due to health issues. Asbestos was used for insulation in buildings.

Assessment / Assessments

The amount of tax owed(in real estate).

Assessed Value

Calculation of property value for taxation purposes by local government representatives.

Assessment Rolls

Lists of taxable property.

Assessor

Government official who determines value of property for taxation purposes.

Assignment

A method by which a contract is transferred from one individual to another. For example, I may sign an assignment renting an office in the building that I am currently leasing.

Asset

Piece of physical or intellectual property that has monetary value. For example: car, furnishing, stock, inventory, bond etc.

Asset Case

Bankruptcy proceeding with non-exempt assets that can be paid to the creditor. 

Assignor

An individual who transfers property rights to another person. 

Assumption

Mortgage transfer from one person to another. Lenders must approve the transfer for assumption to take place.

Assumption Fee

Fee charged by the lender in an event of mortgage transfer. Person acquiring rights to the mortgage(buyer) pays lender a fee for the privilege. For example, Ron buys a house from Alex, while keeping Alex’s mortgage because it has a very attractive interest rate. Ron will have to pay Alex’s lender an assumption fee for the transfer.

Assumption Clause

An option in a mortgage which allows seller of the property to transfer his mortgage to the buyer. This can be useful, since interest rates that the seller has, may be lower than those on the current market. 

Assumability

Flexibility of a mortgage to transfer rights. For example, Ron may want to transfer his mortgage to Alex, however Ron’s mortgage agreement may not allow it. Assumabilty measures whether a loan can or cannot be transferred from one borrower to another.

Assumable Mortgage / Assumable Loan

A mortgage that can be transferred from one borrowed to another.

Attorney-in-fact / Attorney in fact

Person authorized by another person to act as an attorney with limited powers. For example, Ron is going away for year, but wants to sell his house. He can appoint Alex as his attorney-in-fact and Alex can sell his property as Ron wished.

Automatic Transfer

Borrower can set up his bank account to automatically send payment on a mortgage to the lender.

Audit

Examination of a property. Audits can be carried out by buyers(open doors), government officials, lenders, lawyers, real estate agents and any other persons having interest in a property.

Automatic Payment

An agreement which allows lenders to automatically deduct money from persons bank account, within specific intervals of time, taking out monthly mortgage payments and other associated payments.

Automatic Stay

The minute bankruptcy is filed all of the lawsuits, foreclosure and other collection activities are stopped - called automatic stay. 

Automated Underwriting System / Automated Underwriting

Underwriting is the process of mortgage approval or denial, based on the assumed ability of the applicant to pay the mortgage. Big institutions have developed automated systems for that purpose. Lenders enter an application, together with credit rating and automated underwriting system either approves or disapproves it.

Average Annual Yield

Average annual yield is the average profit from an investment, calculated yearly and expressed as a percentage.

Aviation Easement

The agreement which permits the use of air above property (for airplanes).

Average Tax Rate

Total taxes paid divided by income. Average tax rate is designed to determine taxes paid per dollar.