Adjustable Rate Mortgage (ARM)
A mortgage loan that allows the lender to adjust the interest rate periodically to reflect changes in market conditions. Your mortgage payments may adjust up or down as the interest rate changes, in accordance with a stated index and with pre-determined limits (or caps). (Also known as Variable Rate Mortgages.
The repayment of a mortgage loan with periodic payments of principal and interest, at the end of a fixed period of time.
Annual Percentage Rate (APR)
The interest rate that reflects the actual cost of credit on a yearly basis expressed as a percentage. Because the APR may include points and other costs associated with the loan, it more accurately reflects what you’ll be paying, and allows you to compare different mortgages based on actual costs.
Annual Percentage Yield (APY)
The interest rate that reflects the actual interest earned on a yearly basis expressed as a percentage.
An estimate of the fair market value of a home made by a professional appraiser.
Automated Clearinghouse (ACH)
A computer-based clearing and settlement operation, often operated by a Federal Reserve Bank, established for the exchange of electronic transactions among participating depository institutions. Such electronic transactions can be substituted for paper checks used to make recurring payments, such as payroll checks, loan payments, insurance premiums, etc.
ATM (Automated Teller Machine)
Machines that allow the user to perform various banking transactions, including withdrawals and deposits.
Automatic Transfer Service (ATS)
An arrangement which allows funds to be transferred from a depositor’s checking account or statement savings account to the same depositor’s checking account to cover a check written and avoid overdraft.
Percentage restrictions on an adjustable rate mortgage that limits the amount the interest rate may change per year and over the life of the loan.
Certificate of Deposit (CD)
A deposit account that cannot be withdrawn from before a specified maturity date without being subject to an interest penalty for early withdrawal.
Any loan in which the funds borrowed, plus any finance charges, are expected to be repaid in full over a definite time.
Fees paid at a mortgage closing. Fees may vary, but some examples include title insurance, attorney fees, appraisal fees, recording fees and taxes.
Property that is used to secure a loan or other credit and that becomes subject to seizure on default. (Also called security.)
Another person who signs for a loan and assumes equal liability for it.
A card that resembles a credit or ATM card, but which debits a transaction account (checking account) with the transfers occurring simultaneously with the customer’s purchase. Generally, a debit card may be used at specified automated payment terminals, such as retail stores and gas stations, or at an ATM.
A method of payment, which electronically credits your checking, or savings account; most commonly, payroll and government checks.
Electronic Fund Transfer System (EFTS)
A variety of systems and technologies for transferring funds electronically rather than by check. Includes Fedwire, ACH and other automated systems.
The value of your home after the outstanding balance of any loans is subtracted. For example, if the borrower’s home is worth $100,000 and the borrower owes $60,000 on the mortgage loan secured by the home, the borrower’s equity is $40,000, or 40% equity in the home.
An account established with a mortgage lender in which a portion of the monthly mortgage payment funds is held to pay for taxes and insurance when they become due.