Mortgage Glossary
2/1 Buy Down Mortgage
The 2/1 Buy Down Mortgage allows the borrower to qualify at below market rates so they can borrow more. The initial starting interest rate increases by 1% at the end of the first year and adjusts again by another 1% at the end of the second year. It then remains at a fixed interest rate for the remainder of the loan term. Borrowers often refinance at the end of the second year to obtain the best long term rates; however, even keeping the loan in place for three full years or more will keep their average interest rate in line with the original market conditions.
Acceleration Clause Provision in a mortgage that allows the lender to demand payment of the entire principal balance if a monthly payment is missed or some other default occurs.
Additional Principal Payment A way to reduce the remaining balance on the loan by paying more than the scheduled principal amount due.Adjustable-Rate Mortgage (ARM)
A mortgage with an interest rate that changes during the life of the loan according to movements in an index rate. Sometimes called AMLs (adjustable mortgage loans) or VRMs (variable-rate mortgages).
Adjusted Basis The cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken. Adjustment Date The date that the interest rate changes on an adjustable-rate mortgage (ARM).
Adjustment Period The period elapsing between adjustment dates for an adjustable-rate mortgage (ARM).
Affordability Analysis
An analysis of a buyers ability to afford the purchase of a home. Reviews income, liabilities, and available funds, and considers the type of mortgage you plan to use, the area where you want to purchase a home, and the closing costs that are likely.
Amortization The gradual repayment of a mortgage loan, both principal and interest, by installments.
Amortization Term The length of time required to amortize the mortgage loan expressed as a number of months. For example, 360 months is the amortization term for a 30-year fixed-rate mortgage.
Annual Percentage Rate (APR) The cost of credit, expressed as a yearly rate including interest, mortgage insurance, and loan origination fees. This allows the buyer to compare loans, however APR should not be confused with the actual note rate
