Mortgage Glossary - A

Definitions of Mortgage Terms

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Addendum Additional principal payment Adjustable-rate mortgage (ARM) Adjusted basis Adjusted cost basis Adverse possession Adverse Use Agreement of sale Alternative mortgage Amortization Amortization schedule Amortization table

Amortization term Annual percentage rate (APR) Application Appraisal Appraised value Appreciation Arbitration Assessed value Assignor Assumable mortgage Assumption clause

 

• Addendum - Something that is added to the mortgage for either the buyer or seller.
• Additional principal payment- Additional extra payments applied to the outstanding loan should accelerate the payoff date causing a savings in interest charges. Each lender may handle pre-payments entirely differently. When a loan is negotiated between the lender and borrower, usually a clause will be included in the loan papers regarding additional prepayments.
• Adjustable-rate mortgage (ARM) - A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All ARMs are tied to indexes
• Adjusted basis - The amount you use to determine your profit or loss from a sale or exchange of property.
• Adjusted cost basis - To determine your adjusted basis for an asset, start with the amount you originally paid, add your cost of improvements and assessments, then subtract deductions you have taken, such as depreciation and depletion.
• Adverse possession - A means of getting title to land by using it without the objection of the title holder.
• Adverse Use - Use of someone's property without permission.
• Agreement of sale - Same as a contract of purchase, purchase agreement, or sales agreement. It is an agreement which the seller agrees to sell and a buyer agrees to buy under terms spelled out in writing.
• Alternative mortgage - A home loan that is not a standard fixed-rate mortgage. 7/23 and 5/25 mortgages with a one-time rate adjustment after seven years and five years, respectively. Also known as a hybrid mortgage or two-step mortgage.
• Amortization - The loan payment consists of a portion which will be applied to pay the accruing interest on a loan, with the remainder being applied to the principal. Over time, the interest portion decreases as the loan balance decreases, and the amount applied to principal increases so that the loan is paid off (amortized) in the specified time.
• Amortization schedule - A table which shows how much of each payment will be applied toward principal and how much toward interest over the life of the loan. It also shows the gradual decrease of the loan balance until it reaches zero.
• Amortization table - Mathematical formula for calculating a borrower's monthly payments, based on the amount borrowed, the interest rate and the term of the loan
• Amortization term - The time required to amortize (repay) a mortgage loan. The amortization term is usually expressed in months. A 30-year fixed-rate mortgage, for example, has an amortization term of 360 months.
• Annual percentage rate (APR) - The total yearly cost of a mortgage stated as a percentage of the loan amount; includes the base interest rate, primary mortgage insurance, and loan origination fee (points).
• Application - The form used to apply for a mortgage loan, containing information about a borrower's income, savings, assets, debts, and more.
• Appraisal - A professional opinion of the market value of a property.
• Appraised value - An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property. Since an appraisal is based primarily on comparable sales, and the most recent sale is the one on the property in question, the appraisal usually comes out at the purchase price.
• Appreciation - An increase in the value of a house due to changes in market conditions or other causes.
• Arbitration - A dispute-resolution method in which an impartial third party, agreed upon by all sides beforehand, makes a decision.
• Assessed value - The valuation placed on property by a public tax assessor for purposes of taxation.
• Assignor - A person who transfers property to another.
• Assumable mortgage - A mortgage that can be assumed by the buyer when a home is sold. Usually, the borrower must "qualify" in order to assume the loan.
• Assumption clause - The transfer of the seller's existing mortgage to the buyer.