Financial Glossary
"As Is" Condition
Premises accepted by a buyer or tenant in the condition existing at the time of the sale or lease, including all physical defects.
Abstract (of Title)
A historical summary of all the recorded transactions that affect the title to the property. An attorney or a title company will review an abstract of title to determine if there are any problems affecting the title to the property. All such problems must be cleared before the buyer can be issued a clear and insurable title.
Abstract of Judgment
A summary of the essential provisions of a court judgment that, when recorded in the county recorder's office, creates a lien upon the property (both presently owned and subsequently acquired) of the debtor in that county.
Acceleration Clause
A loan provision giving the lender the power to declare all sums owing lender immediately due and payable upon the violation of a specific loan provision, such as the sale of the property, or the failure to make loan payments on time.
Accretion
The addition to land through natural forces like wind or water.
Accrued Interest
The interest earned for the period of time that has elapsed since interest was last paid.
Acknowledgment
Formal declaration before a public official (typically a Notary Public) that one has signed a document. Required before recording real estate legal documents, such as a deeds of trust.
Acre
A measure of land equal to 43,560 square feet.
Addendum
An attachment to a contract, deed or other document that incorporates additional terms of information into the original.
Adjustable Rate Mortgage (ARM)
Also known as a variable rate mortgage. The interest rate on these mortgages changes periodically.
Adjustable-Rate Rider
A rider is an addition to a security instrument. The adjustable-rate rider outlines terms and conditions specific to an adjustable-rate loan. It must be recorded along with the security instrument at the county recorder's office.
Adjusted Balance
The balance that remains when all payments made during a billing cycle are subtracted from the balance from the previous billing cycle. This balance does not include finance charges for the current billing cycle.
Adjustment Cap
A provision of an ARM limiting how much the interest rate or mortgage payments may increase.
Adjustment Period
This is the length of time for which the interest rate is fixed on an adjustable. Therefore if the adjustment period is six months, then the interest rate will remain fixed for six months, after which time it will adjust.
Agreement of Sale
A written signed agreement between the seller and the purchaser in which the purchaser agrees to buy certain real estate and the seller agrees to sell upon terms of the agreement. Also known as contract of purchase, purchase agreement, offer and acceptance, earnest money contract or sales agreement.
Amenity
Any feature that enhances property value. Examples are off-street parking within a condominium community, the proximity of public transportation, tennis courts or a swimming pool.
Amortization
A gradual paying off of a debt by periodic installments which pay principal and interest.
Amortization Schedule
A timetable for payment of a mortgage showing the amount of each payment applied to interest and principal and the remaining balance on the loan.
Amount Owed on Trade-In
The total amount of money you still owe on the current financing for a trade-in vehicle if you're still making payments. To get your exact payoff amount, contact your lender.
Annual Fee
A yearly fee charged to a customer to participate in an open-ended credit program.
Annual Membership
An amount that may be charged annually for having a line of credit available. Often charged regardless of whether or not you use the line. Also referred to as a "participation fee".
Annual Percentage Rate (APR)
The effective rate of interest for a loan per year. This rate is typically higher than the note rate because it takes into account closing costs. This is one way to compare loan programs offered by different lenders. Caution: the APR is sometimes computed differently by different lenders and can be misleading.
Annual Percentage Rate (APR)
The cost of credit expressed as a yearly rate. APR is a percentage that results from an equation considering the amount financed, the finance charges, and the term of the loan.
Annuity
Fixed payments an individual receives for a lifetime or a specified number of years at consistent intervals. For example, a person may receive an annuity from a pension plan or from an investment.
Application
An initial statement of personal and financial information which is required to approve your loan.
Application Fee
Fees that are paid upon application. An application fee may frequently include charges for property appraisal ($200-$400) and a credit report ($30-50).
Appraisal
An opinion or estimate of the value of a property at a given date.
Appraised Value
An opinion of the value of a property at a given time, based on facts regarding the location, improvements, etc., to the property and surroundings.
Appreciation
An increase in the value of a house due to changes in market conditions or other causes.
Arm's Length Transaction
A transaction among parties each of who acts in his or her own best interest.
Assessed Value
The valuation placed upon a property by a public tax assessor for purposes of taxation.
Assessment
A local tax levied against a property for a specific purpose such as street lights.
Assets
Items of monetary value (e.g., house, land, car), owned by an individual or a company.
Assignment of Lease
A mortgage clause that passes control of leases on an income-producing property to the lender. Often a condition to making a loan to ensure that, in case of mortgage default, any continuing income from the property goes directly to the lender.
Assumption (of Mortgage)
The transfer of the seller's existing mortgage to the buyer.
ATM
Acronym for automated teller machine.
Attorney in Fact
One who is authorized to act for another under a power of attorney which may be general or limited in scope.
Attorney's Opinion of Title (In Absence of a Title Company)
A statement issued by an attorney in states that don't use a preliminary title report or title commitment. All liens recorded against the property are disclosed in this statement. The attorney also advises on items that require completion to gain a clear title insurance policy before recording a security instrument.
Authorized User
A person who has been given permission to make changes to a credit account. This status must be given by the primary account user. An authorized user is not legally responsible for repaying the account.
Average Daily Balance
The balance that results from adding together all the daily balances of a credit account in the billing cycle and dividing by the number of days in the billing cycle. This balance is often used to calculate finance charges.