Finance Glossary


 

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*Finance glossary terms provided by MortgageLoan.com. JoeCuellar.com is not responsible for the accuracy of information provided on this page.

Joe Cuellar

NMLS 34976
Branch Manager, McAllen
CRM Lending, LLC

0-9

1 month LIBOR rate 1-month LIBOR (London Interbank Offered Rate) rate is the stated rate of interest at which banks in the London wholesale money markets may borrow funds from one another for one month. The British Bankers’ Association resets the 1-month LIBOR daily, based on an average of global interbank deposit rates. LIBOR rates tend to follow global interest rate trends and are therefore frequently used as the benchmark index for adjustable-rate mortgages.
1 year LIBOR rate 1-year LIBOR (London Interbank Offered Rate) rate is the stated rate of interest at which banks in the London wholesale money markets may borrow funds from one another for one year. The British Bankers’ Association resets the 1-year LIBOR rate daily, based on an average of global interbank deposit rates. LIBOR rates tend to follow global interest rate trends and are therefore frequently used as the benchmark index for adjustable-rate mortgages.
1/1 ARM A 1/1 ARM (adjustable-rate mortgage) has an initial interest rate that remains in effect for one year, after which time the rate is adjusted once annually. The first “1” of “1/1” refers to the number of years the initial rate will apply; the second “1” refers to the time interval between subsequent rate adjustments.
10/1 ARM A 10/1 ARM (adjustable-rate mortgage) has an initial interest rate that remains in effect for 10 years, after which time the rate is adjusted once annually. The “10” of “10/1” refers to the number of years the initial rate will apply; the “1” refers to the time interval between subsequent rate adjustments.
100% mortgage A 100% mortgage is a mortgage loan that requires no borrower downpayment; the loan amount covers the full purchase price of the property. The borrower may be required to provide another source of collateral, in addition to the property itself, to secure the mortgage loan.
10-year fixed mortgage A 10-year fixed mortgage is a mortgage loan that keeps the same rate of interest throughout the loan’s 10-year life. In most cases, fixed-rate mortgages are fully amortizing, so that the debt will be paid off at the end of the 10-year term.
11th District Cost of Funds Index – COFI The 11th District Cost of Funds Index (COFI) is a weighted average of interest rates paid on checking and savings accounts in Arizona, California, and Nevada. The index, published at the end of each month, reflects the cost of deposit funds for the financial institutions in these states. COFI is used as a base rate, or benchmark, for adjustable-rate mortgages.
125% Loan A 125% loan is a mortgage loan that allows the homeowner to borrow up to 125 percent of a property’s value. If a home is valued at $300,000, a 125% loan would allow the homeowner to borrow up to $375,000.
12-month moving Treasury average (MTA) The 12-month moving Treasury average (MTA) is a financial index that’s used as a base rate, or benchmark, for adjustable-rate mortgages. The MTA is a monthly average, based on the most recent 12 months, of the one-year constant maturity Treasury (CMT) index.
15 year fixed mortgage A mortgage that maintains the same interest rate for the entire 15 year term of the loan.
15 year jumbo mortgage A mortgage which exceeds the limits as set for the by Freddie Mac and Fannie Mae. The limit changes annually. These mortgages generally have higher interest rates than conventional mortgages.
15-year fixed mortgage A 15-year fixed mortgage is a mortgage loan that keeps the same rate of interest throughout the loan’s 15-year life. In most cases, fixed-rate mortgages are fully amortizing, so that the debt will be paid off at the end of the 15-year term.
15-year fixed mortgage refinance A 15-year fixed mortgage refinance is a type of mortgage loan that replaces an existing mortgage loan; the new debt is structured with a 15-year maturity and an interest rate that stays the same throughout those 15 years.
15-year jumbo mortgage A 15-year jumbo mortgage has two defining characteristics. First, the mortgage loan’s maturity period is 15 years. Secondly, the mortgage loan amount exceeds the maximum loan size that government-chartered agencies Fannie Mae and Freddie Mac can purchase or guarantee. Because Fannie Mae and Freddie Mac don’t support jumbo mortgages, these loans usually carry higher interest rates. Jumbo loan limits are set annually based on housing values.
182-day T-bill auction average discount rate The 182-day T-bill auction average discount rate is the average yield on Treasury bills that mature in 182 days, based on sales made at weekly competitive auctions. Investors purchase the T-bills at a discount, meaning the purchase price is less than the note’s face value. A steeper discount means a higher yield. The 182-day T-bill auction average discount rate is used as a base rate, or benchmark, for adjustable-rate mortgages.
1-month CD A 1-month CD (certificate of deposit) is a savings instrument that pays a fixed rate of interest and remains in effect for a period of one month. Funds cannot be withdrawn earlier than the one-month expiration without penalty. Bank-issued CDs are insured by the FDIC for amounts up to $100,000 per depositor.
1-month IRA CD A 1-month IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The deposit pays a fixed rate of interest and remains in effect for a period of one month. Funds cannot be withdrawn earlier than the one-month expiration without penalty. IRA CDs are insured by the FDIC for amounts up to $250,000 per depositor.
1-month jumbo CD A 1-month jumbo CD is a large savings instrument, usually with a minimum value of $100,000, that pays a fixed rate of interest and remains in effect for a period of one month. Funds cannot be withdrawn earlier than the one-month expiration without penalty. Jumbo CDs are considered a slightly higher risk than CDs of lower denominations, because FDIC insurance only covers the first $100,000 of the deposit.
1-month jumbo IRA CD A 1-month jumbo IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The deposit pays a fixed rate of interest and remains in effect for a period of one month. The term “jumbo” refers to the deposit’s minimum denomination, which is usually $100,000. Funds cannot be withdrawn earlier than the one-month expiration without penalty. The FDIC insures IRA CDs for amounts up to $250,000 per depositor.
1-year ARM A 1-year ARM (adjustable-rate mortgage) has an initial interest rate that remains in effect for one year, after which the rate is adjusted, once annually. Adjustments are based on the movement of an underlying benchmark, but do not exceed specified interest rate caps.
1-year ARM refinance A 1-year ARM (adjustable-rate mortgage) refinance is a type of mortgage loan that replaces an existing mortgage loan.   The new debt has an initial interest rate that remains in effect for one year, after which the rate is adjusted once annually. Adjustments are based on the movement of an underlying benchmark, but do not exceed specified interest rate caps.
1-year CD A 1-year CD (certificate of deposit) is a savings instrument that pays a fixed rate of interest and remains in effect for a period of one year. Funds cannot be withdrawn earlier than the one-year expiration without penalty. Bank-issued CDs are insured by the FDIC for amounts up to $100,000 per depositor.
1-year IRA CD A 1-year IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The deposit pays a fixed rate of interest and remains in effect for a period of one year. Funds cannot be withdrawn earlier than the one-year expiration without penalty. IRA CDs are insured by the FDIC for amounts up to $250,000 per depositor.
1-year jumbo CD A 1-year jumbo CD is a large savings instrument, usually with a minimum value of $100,000, that pays a fixed rate of interest and remains in effect for a period of one year. Funds cannot be withdrawn earlier than the one-year expiration without penalty. Jumbo CDs are considered slightly higher risk than CDs of lower denominations, because FDIC insurance only covers the first $100,000 of the deposit.
1-year jumbo IRA CD A 1-year jumbo IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The deposit pays a fixed rate of interest and remains in effect for a period of one year. The term “jumbo” refers to the deposit’s minimum denomination, which is usually $100,000. Funds cannot be withdrawn earlier than the one-year expiration without penalty. The FDIC insures IRA CDs for amounts up to $250,000 per depositor.
2.5-year CD A 2.5-year CD (certificate of deposit) is a savings instrument that pays a fixed rate of interest and remains in effect for a period of 18 months. Funds cannot be withdrawn earlier than the 18-month expiration without penalty. Bank-issued CDs are insured by the FDIC for amounts up to $100,000 per depositor.
2.5-year IRA CD A 2.5-year IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The deposit pays a fixed rate of interest and remains in effect for a period of 30 months. Funds cannot be withdrawn earlier than the 30-month expiration without penalty. IRA CDs are insured by the FDIC for amounts up to $250,000 per depositor.
2.5-year jumbo CD A 2.5-year jumbo CD is a large savings instrument, usually with a minimum value of $100,000, that pays a fixed rate of interest and remains in effect for a period of 30 months. Funds cannot be withdrawn earlier than the 30-month expiration without penalty. Jumbo CDs are considered slightly higher risk than CDs of lower denominations, because FDIC insurance only covers the first $100,000 of the deposit.
2.5-year jumbo IRA CD A 2.5-year jumbo IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The deposit pays a fixed rate of interest and remains in effect for a period of 30 months. The term “jumbo” refers to the deposit’s minimum denomination, which is usually $100,000. Funds cannot be withdrawn earlier than the 30-month expiration without penalty. The FDIC insures IRA CDs for amounts up to $250,000 per depositor.
2/28 ARM A 2/28 ARM (adjustable-rate mortgage) has an initial interest rate that remains in effect for two years, after which the rate is adjusted annually over the remaining 28 years of the loan.
20 year fixed mortgage A mortgage that maintains the same interest rate for the entire 20 year term of the loan.
20-year fixed refinance mortgage A 20-year fixed mortgage refinance is a type of mortgage loan that replaces an existing mortgage loan; the new debt is structured with a 20-year maturity and an interest rate that stays the same throughout those 20 years.
2-1 Buydown A 2-1 Buydown is a feature that allows for a temporary interest rate reduction on a fixed-rate mortgage. In exchange for an upfront fee, the lender lowers the mortgage’s permanent rate by 2 percent in the first year, and 1 percent in the second year. In the third year, the mortgage reverts to its permanent rate. Sellers sometimes pay for the buydown as an incentive. Buydowns are used on purchases only.
2-month CD A 2-month CD (certificate of deposit) is a savings instrument that pays a fixed rate of interest and remains in effect for a period of two months. Funds cannot be withdrawn earlier than the two-month expiration date without penalty. Bank-issued CDs are insured by the FDIC for amounts up to $100,000 per depositor.
2-month IRA CD A 2-month IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The deposit pays a fixed rate of interest and remains in effect for a period of two months. Funds cannot be withdrawn earlier than the two-month expiration date without penalty. IRA CDs are insured by the FDIC for amounts up to $250,000 per depositor.
2-month jumbo CD A 2-month jumbo CD is a large savings instrument, usually with a minimum value of $100,000, that pays a fixed rate of interest and remains in effect for a period of two months. Funds cannot be withdrawn earlier than the two-month expiration date without penalty. Jumbo CDs are considered slightly higher risk than CDs of lower denominations, because FDIC insurance only covers the first $100,000 of the deposit.
2-month jumbo IRA CD A 2-month jumbo IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The deposit pays a fixed rate of interest and remains in effect for a period of two months. The term “jumbo” refers to the deposit’s minimum denomination, which is usually $100,000. Funds cannot be withdrawn earlier than the two-month expiration date without penalty. The FDIC insures IRA CDs for amounts up to $250,000 per depositor.
2-year CD A 2-year CD (certificate of deposit) is a savings instrument that pays a fixed rate of interest and remains in effect for a period of 24 months. Funds cannot be withdrawn earlier than the 24-month expiration date without penalty. Bank-issued CDs are insured by the FDIC for amounts up to $100,000 per depositor.
2-year IRA CD A 2-year IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The deposit pays a fixed rate of interest and remains in effect for a period of 24 months. Funds cannot be withdrawn earlier than the 24-month expiration date without penalty. IRA CDs are insured by the FDIC for amounts up to $250,000 per depositor.
2-year jumbo CD A 2-year jumbo CD is a large savings instrument, usually with a minimum value of $100,000, that pays a fixed rate of interest and remains in effect for a period of 24 months. Funds cannot be withdrawn earlier than the 24-month expiration date without penalty. Jumbo CDs are considered slightly higher risk than CDs of lower denominations, because FDIC insurance only covers the first $100,000 of the deposit.
2-year jumbo IRA CD A 2-year jumbo IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The deposit pays a fixed rate of interest and remains in effect for a period of 24 months. The term “jumbo” refers to the deposit’s minimum denomination, which is usually $100,000. Funds cannot be withdrawn earlier than the 24-month expiration date without penalty. The FDIC insures IRA CDs for amounts up to $250,000 per depositor.
3 month LIBOR rate 3 month LIBOR (London Interbank Offered Rate) rate is the stated rate of interest at which banks in the London wholesale money markets may borrow funds from one another for three months. The British Bankers’ Association resets the 3-month LIBOR daily, based on an average of global interbank deposit rates. LIBOR rates tend to follow global interest rate trends and are therefore frequently used as the benchmark index for adjustable-rate mortgages.
3/1 ARM A 3/1 ARM (adjustable-rate mortgage) has an initial interest rate that remains in effect for three years, after which time the rate is adjusted once annually. The “3” of “3/1” refers to the number of years the initial rate will apply; the “1” refers to the time interval between subsequent rate adjustments.
3/1 interest-only ARM A 3/1 interest-only ARM (adjustable-rate mortgage) has several distinct features. First, the minimum payments during the first three years of the mortgage do not reduce the principal balance. The interest rate remains the same during this period. Thereafter, the mortgage converts to an amortizing loan, and the interest rate resets to track with a stated financial index. The rate is then adjusted once annually, based on the movements of the underlying index, and subject to preset limits.
3/1 interest-only refinance ARM A 3/1 interest-only refinance ARM (adjustable-rate mortgage) replaces an existing mortgage loan. The minimum payments during the first three years of the new mortgage do not reduce the principal balance. The interest rate remains the same during this period. Thereafter, the mortgage converts to an amortizing loan and the interest rate resets to track with a specified financial index. The rate is then adjusted once annually, based on the movements of the underlying index, and subject to preset limits.
3/27 Adjustable Rate Mortgage – 3/27 ARM A 3/27 ARM (adjustable-rate mortgage) has an initial interest rate that remains in effect for three years, after which time the rate is adjusted annually over the remaining 27 years of the loan.
30 year fixed mortgage A mortgage that maintains the same interest rate for the entire 30 year term of the loan.
30-year FHA mortgage A 30-year FHA mortgage is a mortgage loan insured by the Federal Housing Administration (FHA). The mortgage keeps the same rate of interest throughout the 30-year term. FHA loans are designed for low- to moderate-income borrowers who are unable to make a large downpayment.
30-year FHA mortgage refinance A 30-year FHA mortgage refinance is a type of mortgage loan that replaces an existing mortgage. The new loan is insured by the Federal Housing Administration (FHA) and keeps the same rate of interest throughout the 30-year term. FHA loans are designed for low- to moderate-income borrowers.
30-year fixed mortgage A 30-year fixed mortgage is a mortgage loan that keeps the same rate of interest throughout the loan’s 30-year life. In most cases, fixed-rate mortgages are fully amortizing, so that the debt will be paid off at the end of the 30-year term.
30-year fixed mortgage refinance A 30-year fixed mortgage refinance is a type of mortgage loan that replaces an existing mortgage loan.   The new debt is structured with a 30-year maturity and an interest rate that stays the same throughout those 30 years.
30-year jumbo mortgage A 30-year jumbo mortgage has two defining characteristics. First, the mortgage loan’s maturity period is 30 years. Secondly, the mortgage loan amount exceeds the maximum loan size that government-chartered agencies Fannie Mae and Freddie Mac can purchase or guarantee. Because Fannie Mae and Freddie Mac don’t support jumbo mortgages, these loans usually carry higher interest rates. Jumbo loan limits are set annually based on housing values.
3-2-1 Buydown A 3-2-1 Buydown is a feature that allows for a temporary interest rate reduction on a fixed-rate mortgage. In exchange for an upfront fee, the lender lowers the mortgage’s permanent rate by 3 percent in the first year, 2 percent in the second year, and 1 percent in the third year. In the fourth year, the mortgage resets to its permanent rate. Sellers sometimes pay for the buydown as an incentive to buyers. Buydowns are used on purchases only.
36-month new auto loan A 36-month new auto loan is a form of financing used for the purchase of a new car. The fixed monthly principal and interest payments are structured so that the loan is paid off in three years.
36-month refinance auto loan A 36-month refinance auto loan is a form of financing that replaces an existing auto loan. The fixed monthly principal and interest payments are structured so that the loan is paid off in three years.
36-month used auto loan A 36-month used auto loan is a form of financing provided for the purchase of a used car. The fixed monthly principal and interest payments are structured so that the loan is paid off in three years.
3-month CD A 3-month CD (certificate of deposit) is a savings instrument that pays a fixed rate of interest and remains in effect for a period of three months. Funds cannot be withdrawn earlier than the three-month expiration date without penalty. Bank-issued CDs are insured by the FDIC for amounts up to $100,000 per depositor.
3-month IRA CD A 3-month IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The deposit pays a fixed rate of interest and remains in effect for a period of three months. Funds cannot be withdrawn earlier than the three-month expiration date without penalty. IRA CDs are insured by the FDIC for amounts up to $250,000 per depositor.
3-month jumbo CD A 3-month jumbo CD is a large savings instrument, usually with a minimum value of $100,000, that pays a fixed rate of interest and remains in effect for a period of three months. Funds cannot be withdrawn earlier than the three-month expiration without penalty. Jumbo CDs are considered slightly higher risk than CDs of lower denominations, because FDIC insurance only covers the first $100,000 of the deposit.
3-month jumbo IRA CD A 3-month jumbo IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The deposit pays a fixed rate of interest and remains in effect for a period of three months. The term “jumbo” refers to the deposit’s minimum denomination, which is usually $100,000. Funds cannot be withdrawn earlier than the three-month expiration date without penalty. The FDIC insures IRA CDs for amounts up to $250,000 per depositor.
3-month, $25,000 IRA CD A 3-month $25,000 IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The $25,000 deposit pays a fixed rate of interest and remains in effect for a period of three months. Funds cannot be withdrawn earlier than the three-month expiration date without penalty. IRA CDs are insured by the FDIC for amounts up to $250,000 per depositor.
3-month, $50,000 IRA CD A 3-month $50,000 IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The $50,000 deposit pays a fixed rate of interest and remains in effect for a period of three months. Funds cannot be withdrawn earlier than the three-month expiration date without penalty. IRA CDs are insured by the FDIC for amounts up to $250,000 per depositor.
3-year CD A 3-year CD (certificate of deposit) is a savings instrument that pays a fixed rate of interest and remains in effect for a period of 36 months. Funds cannot be withdrawn earlier than the 36-month expiration date without penalty. Bank-issued CDs are insured by the FDIC for amounts up to $100,000 per depositor.
3-year IRA CD A 3-year IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The deposit pays a fixed rate of interest and remains in effect for a period of 36 months. Funds cannot be withdrawn earlier than the 36-month expiration date without penalty. IRA CDs are insured by the FDIC for amounts up to $250,000 per depositor.
401(k) plan A 401(k) plan is a qualified retirement savings plan established by employers for employees. Employees may make pretax salary contributions, or deposits, into the plan, and the employer may partially match these contributions. Investment earnings grow tax-free within the plan until funds are withdrawn after the accountholder reaches the age of 59 1/2.
401(k)/403(b) loan 401(k) and 403(b) are both plans that allow employees to invest and save for their retirment. The employees can authorize their employers to deduct a certain amount of the money from their salary before taxes to invest in these plans. They also permit the taking of loans against funds accrued in these plans. Loans against the 401(k) are often used as down payment for these loans. The 403(b) is also known as tax sheltered annuity (TSA) plan and is provided for employees of public schools, certain tax-exempt organizations and other certain ministries whereas the 410(k) is mainly for private organizations.
403(b) plan A plan similar to a 401(k), but this plan is designed for public employees and nonprofit organizations.
40-year mortgage A 40-year mortgage is a mortgage loan that’s structured with a repayment period of 40 years. The conventional mortgage repayment term is 30 years; relative to the 30-year mortgage, the 40-year mortgage will have a lower monthly payment amount.
48-month new auto loan A 48-month new auto loan is a form of financing used for the purchase of a new car. The fixed monthly principal and interest payments are structured so that the loan will be paid off in four years.
48-month refinance auto loan A 48-month refinance auto loan is a form of financing that replaces an existing auto loan. The fixed monthly principal and interest payments are structured so that the loan will be paid off in four years.
48-month used car loan A 48-month used auto loan is a form of financing used for the purchase of a used car. The fixed monthly principal and interest payments are structured so that the loan will be paid off in four years.
5 C’s of credit The 5 C’s of credit — character, capacity, capital, collateral, and conditions — are criteria used to assess a borrower’s creditworthiness. Character, capacity, capital, and collateral refer to the borrower’s willingness and ability to repay the debt. Conditions include the borrower’s situation as well as general economic factors.
5/1 ARM A 5/1 ARM (adjustable-rate mortgage) has an initial interest rate that remains in effect for five years, after which time the rate is adjusted once annually. The “5” of “5/1” refers to the number of years the initial rate will apply; the “1” refers to the time interval between subsequent rate adjustments.
5/1 interest-only ARM A 5/1 interest-only ARM (adjustable-rate mortgage) has several distinct features. First, the minimum payments during the first five years of the mortgage do not reduce the principal balance. The interest rate remains the same during this period. Thereafter, the mortgage converts to an amortizing loan, and the interest rate resets to track with a stated financial index. The rate is then adjusted once annually, based on the movements of the underlying index, and subject to preset limits.
5/1 interest-only jumbo refinance ARM A 5/1 interest-only jumbo refinance ARM (adjustable-rate mortgage) has several defining characteristics. As a refinance, it replaces an existing mortgage loan. The term “jumbo” means the loan amount exceeds the maximum that Fannie Mae and Freddie Mac can purchase or guarantee. The term “5/1 interest-only” refers to the rate and repayment structure: During the first five years of the loan, the debt carries a fixed interest rate, and the payments do not reduce the principal balance. Thereafter, the debt converts to an amortizing loan, with monthly payments consisting of principal and interest, and an adjustable rate. The interest rate is then adjusted once annually.
5/1 interest-only refinance ARM A 5/1 interest-only refinance ARM (adjustable-rate mortgage) replaces an existing mortgage loan. The minimum payments during the first five years of the new mortgage do not reduce the principal balance. The interest rate remains the same during this period. Thereafter, the mortgage converts to an amortizing loan and the interest rate resets to track with a specified financial index. The rate is then adjusted once annually, based on the movements of the underlying index and subject to preset limits.
5/1 jumbo ARM A 5/1 jumbo ARM (adjustable-rate mortgage) has an initial interest rate that remains in effect for five years, after which time the rate is adjusted once annually. The mortgage loan amount exceeds the maximum loan size that government-chartered agencies Fannie Mae and Freddie Mac can purchase or guarantee. Because Fannie Mae and Freddie Mac don’t support jumbo mortgages, these loans usually carry higher interest rates.
5/1 jumbo interest-only ARM A 5/1 jumbo interest-only ARM (adjustable-rate mortgage) has several defining characteristics. The term “jumbo” means the loan amount exceeds the maximum that Fannie Mae and Freddie Mac can purchase or guarantee. The term “5/1” means that the interest rate stays the same for the first five years, after which time the rate is adjusted once annually. As an “interest-only” mortgage, the payments during the first five years do not reduce the principal balance.
5/1 jumbo mortgage A 5/1 jumbo mortgage has an initial interest rate that remains in effect for five years, after which time the rate is adjusted once annually. The mortgage loan amount exceeds the maximum loan size that government-chartered agencies Fannie Mae and Freddie Mac can purchase or guarantee. Because Fannie Mae and Freddie Mac don’t support jumbo mortgages, these loans usually carry higher interest rates.
50-year mortgage A 50-year mortgage is a mortgage loan that’s structured with a repayment period of 50 years. The conventional mortgage repayment term is 30 years; relative to the 30-year mortgage, the 50-year mortgage will have a lower monthly payment amount.
529 plan A savings type plan that allows families to set aside funds for their children’s education with tax benefits. They are set up as prepaid tuition arrangements or simpler savings accounts. Also called Qualified Tuition Plans.
5-year CD A 5-year CD (certificate of deposit) is a savings instrument that pays a fixed rate of interest and remains in effect for a period of 60 months. Funds cannot be withdrawn earlier than the 60-month expiration date without penalty. Bank-issued CDs are insured by the FDIC for amounts up to $100,000 per depositor.
5-year IRA CD A 5-year IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The deposit pays a fixed rate of interest and remains in effect for a period of 60 months. Funds cannot be withdrawn earlier than the 60-month expiration date without penalty. IRA CDs are insured by the FDIC for amounts up to $250,000 per depositor.
5-year jumbo CD A 5-year jumbo CD is a large savings instrument, usually with a minimum value of $100,000, that pays a fixed rate of interest and remains in effect for a period of 60 months. Funds cannot be withdrawn earlier than the 60-month expiration date without penalty. Jumbo CDs are considered slightly higher risk than CDs of lower denominations, because FDIC insurance only covers the first $100,000 of the deposit.
5-year jumbo IRA CD A 5-year jumbo IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The deposit pays a fixed rate of interest and remains in effect for a period of 60 months. The term “jumbo” refers to the deposit’s minimum denomination, which is usually $100,000. Funds cannot be withdrawn earlier than the 60-month expiration date without penalty. The FDIC insures IRA CDs for amounts up to $250,000 per depositor.
60-month new auto loan A 60-month new auto loan is a form of financing used for the purchase of a new car. The fixed monthly principal and interest payments are structured so that the loan is paid off in five years.
60-month refinance auto loan A 60-month refinance auto loan is a form of financing that replaces an existing auto loan. The fixed monthly principal and interest payments are structured so that the loan will be paid off in five years.
6-month CD A 6-month CD (certificate of deposit) is a savings instrument that pays a fixed rate of interest and remains in effect for a period of three months. Funds cannot be withdrawn earlier than the six-month expiration date without penalty. Bank-issued CDs are insured by the FDIC for amounts up to $100,000 per depositor.
6-month IRA CD A 6-month IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The deposit pays a fixed rate of interest and remains in effect for a period of six months. Funds cannot be withdrawn earlier than the six-month expiration date without penalty. IRA CDs are insured by the FDIC for amounts up to $250,000 per depositor.
6-month jumbo CD A 6-month jumbo CD is a large savings instrument, usually with a minimum value of $100,000, that pays a fixed rate of interest and remains in effect for a period of six months. Funds cannot be withdrawn earlier than the six-month expiration date without penalty. Jumbo CDs are considered slightly higher risk than CDs of lower denominations, because FDIC insurance only covers the first $100,000 of the deposit.
6-month jumbo IRA CD A 6-month jumbo IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The deposit pays a fixed rate of interest and remains in effect for a period of six months. The term “jumbo” refers to the deposit’s minimum denomination, which is usually $100,000. Funds cannot be withdrawn earlier than the six-month expiration date without penalty. The FDIC insures IRA CDs for amounts up to $250,000 per depositor.
6-month LIBOR rate The 6-month LIBOR (London Interbank Offered Rate) rate is the stated rate of interest at which banks in the London wholesale money markets may borrow funds from one another for six months. The British Bankers’ Association resets the 6-month LIBOR daily, based on an average of global interbank deposit rates. LIBOR rates tend to follow global interest rate trends and are therefore frequently used as the benchmark index for adjustable-rate mortgages.
6-month, $25,000 IRA CD A 6-month $25,000 IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The $25,000 deposit pays a fixed rate of interest and remains in effect for a period of six months. Funds cannot be withdrawn earlier than the six-month expiration date without penalty. IRA CDs are insured by the FDIC for amounts up to $250,000 per depositor.
6-month, $50,000 IRA CD A 6-month $50,000 IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The $50,000 deposit pays a fixed rate of interest and remains in effect for a period of six months. Funds cannot be withdrawn earlier than the six-month expiration date without penalty. IRA CDs are insured by the FDIC for amounts up to $250,000 per depositor.
7/1 ARM A 7/1 ARM (adjustable-rate mortgage) has an initial interest rate that remains in effect for seven years, after which time the rate is adjusted once annually. The “7” of “7/1” refers to the number of years that the initial rate will apply; the “1” refers to the time interval between subsequent rate adjustments.
7/1 interest-only ARM A 7/1 interest-only ARM (adjustable-rate mortgage) has several distinct features. First, the minimum payments during the first seven years of the mortgage do not reduce the principal balance. The interest rate remains the same during this period. Thereafter, the mortgage converts to an amortizing loan and the interest rate resets to track with a stated financial index. The rate is then adjusted once annually, based on the movements of the underlying index and subject to preset limits.
72 hour clause This clause is designed to protect the seller from losing valuable marketing time during the real estate negotiation period. If a buyer has a house on the market, the seller will accept that buyer’s offer but reserves the right to accept a better offer should one be presented. If this is the case, the seller gives the first buyer 72 hours to commit to the purchase or allow the second offer to prevail.
7-day effective yield 7-day effective yield is a measure of return that helps investors compare the earnings performance of mutual funds and interest-bearing accounts. This measure annualizes the interest/dividends earned over the last seven days, assuming all income is reinvested.
80-10-10 loan A popular loan which allows you to finance 90 percent of the mortgage while avoiding mortgage insurance. The buyer puts down 10 percent, then takes out two mortgages, one for 80 percent and a second for 10 percent. In general, this situation keeps your monthly payments low which makes it easier to qualify for this mortgage.
91-day T-bill auction average discount rate The 91-day T-bill auction average discount rate is the average yield on Treasury bills that mature in 91 days, based on sales made at weekly competitive auctions. Investors purchase the T-bills at a discount–meaning that the purchase price is less than the note’s face value. A steeper discount means a higher yield. The 91-day T-bill auction average discount rate is used as a base rate, or benchmark, for adjustable-rate mortgages.
9-month CD A 9-month CD (certificate of deposit) is a savings instrument that pays a fixed rate of interest and remains in effect for a period of nine months. Funds cannot be withdrawn earlier than the nine-month expiration date without penalty. Bank-issued CDs are insured by the FDIC for amounts up to $100,000 per depositor.
9-month IRA CD A 9-month IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The deposit pays a fixed rate of interest and remains in effect for a period of nine months. Funds cannot be withdrawn earlier than the nine-month expiration date without penalty. IRA CDs are insured by the FDIC for amounts up to $250,000 per depositor.
9-month jumbo CD A 9-month jumbo CD is a large savings instrument, usually with a minimum value of $100,000, that pays a fixed rate of interest and remains in effect for a period of nine months. Funds cannot be withdrawn earlier than the nine-month expiration date without penalty. Jumbo CDs are considered slightly higher risk than CDs of lower denominations, because FDIC insurance only covers the first $100,000 of the deposit.
9-month jumbo IRA CD A 9-month jumbo IRA CD (certificate of deposit) is a savings instrument held within a tax-advantaged Individual Retirement Account (IRA). The deposit pays a fixed rate of interest and remains in effect for a period of nine months. The term “jumbo” refers to the deposit’s minimum denomination, which is usually $100,000. Funds cannot be withdrawn earlier than the nine-month expiration date without penalty. The FDIC insures IRA CDs for amounts up to $250,000 per depositor.

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A- credit The best credit rating that you can have. A FICO score above 720 will get you the best offer the lender can offer and the best interest rates. When applying for a mortgage loan, you will want your credit score to be as high as you can make it. Start working on this immediately.
Abandonment Abandonment happens when the person with a right or interest in a property gives up their interest. Once property has been “abandoned,” it is no longer the property of the estate. This can happen either by physically abandoning the property or by demonstrating the intention of giving up the right or interest.
Abandonment value Abandonment value is the amount which could be recovered from an asset or project if it were liquidated or terminated immediately. Investors would compare an asset’s abandonment value to that asset’s projected earnings to decide whether or not to continue supporting that asset.
Abatement Abatement is a decrease or reduction. In business, the term usually refers to a decrease in a payment obligation, such as tax or debt. Rent abatement is a court-ordered reduction in rents payable due to uninhabitable living conditions.
Ability to Pay A principle of taxation. Individuals who earn more money will pay more income tax not because they utilize more of the government services but because they have the ability to pay more.
Above-the-line deduction Above-the-line deductions are tax items that are subtracted from, or added to, gross income in the calculation of adjusted gross income (AGI).
Abstract of judgment An abstract of judgment is a court document describing a court-ordered, monetary award. The document can be filed with the county recorder’s office to establish a lien against property owned by the defendant.
Abstract of title A summary listing of all the transactions that pertain to the title on a specific piece of land. An abstract of title covers the time from when the property was first sold to the present. This information can be used to create a title binder.
Academy of Financial Divorce Practitioners  The Academy of Financial Divorce Practitioners educates and certifies financial service professionals in the financial consequences of property settlements, child support, and other divorce-related issues. Certified members are awarded the CFDP (Certified Financial Divorce Practitioner) designation.
Accelerated cost recovery system Accelerated cost recovery system, also known as ACRS, is a depreciation method that was introduced and defined in the Economic Recovery Tax Act of 1981. ACRS allows for rapid depreciation (for tax purposes) of property placed into service between 1981 and 1986.
Accelerated depreciation A bookkeeping method primarily for tax purposes that shows how the property is losing value. Depreciation is the reduction of the properties value over passing time. If the property is losing its value quickly, the value can be accelerated so that the majority of its value is lost in the first few years but slows down over the later years in ownership.
Accelerated payments Accelerated payments are amounts applied to a loan over and above the required repayments. These additional, unscheduled payments lower the balance of debt outstanding, and can lead to interest savings and early pay-off.
Accelerated use Accelerated use is a program associated with timeshare ownership. It allows an owner/member who has purchased one week annually, for example, to use more than one week in some years, and less than one week in other years. A 10-year ownership program with accelerated use might allow an owner/member to take two five-week vacations rather than 10, one-week vacations.
Acceleration The right of the mortgagee (lender) to demand the immediate repayment of the mortgage loan balance upon the default of the mortgagor (borrower), or by using the right vested in the Due on Sale Clause.
Acceleration Clause A mortgage acceleration clause is a common provision of a mortgage or note providing the holder with the right to demand that the full outstanding balance is immediately due in the event of default. This is a legal right that is bestowed on the mortgage or loan if the borrower fails to live up to his or her obligations.
Acceptance A positive response to an offer or counter-offer that enables the agreement between the parties.
Acceptance letter An acceptance letter is written correspondence from a college or university notifying a prospective student that he or she has been approved for admission to the college or university.
Accident and health benefits Accident and health benefits are provided by employers to compensate employees for expenses related to illness and accidental injury or death. Employers usually receive a deduction for providing this type of compensation to employees.
Accident and health insurance Accident and health insurance provides coverage for accidental injury, illness, or death. Benefits include payment of medical expenses and payment of income. Some programs also allow for debt payments while the insured is unable to earn income.
Accommodation paper An accommodation paper is a document executed by one party for the benefit of another.   In practice, an accommodation paper is used as a loan guarantee, in which a third party agrees to repay the loan if the borrower does not.
Accommodative monetary policy An accommodative monetary policy is a strategy implemented by a central bank (e.g., the Federal Reserve) to encourage economic growth. Generally, an accommodative monetary policy involves the lowering of interest rates so that money is less expensive for consumers and businesses to borrow.
Account An account is a list of financial transactions. The term can refer to a deposit of money used for the purposes of checking, saving or investing, or it can mean a credit arrangement for the use of buying goods and services.
Account balance Account balance is the net value of all deposits and withdrawals within a financial account as of a certain date. The balance represents the amount of money in the account.
Accountant An accountant is a professional who manages and audits financial records and prepares financial statements and tax documentation for individuals and businesses. Accountants must understand and comply with financial reporting regulations.
Accounting method Accounting method refers to the system of bookkeeping used by an individual or business. The two methods are accrual accounting and cash accounting. Cash accounting is the simpler of the two and the preferred choice for many small businesses.
Accounting period An accounting period is an interval of time covered by a set of financial statements. With respect to tax accounting, the accounting period refers to the 12 months of activity reported in the calculation of income taxes.
Accounts payable Accounts payable, or AP, represent money owed by a company or household for goods and services already received. These are short-term debt obligations.   Businesses list AP as current liabilities on the balance sheet.
Accounts receivable Accounts receivable, or AR, represent money owed to a company or household in the short-term for goods and services already provided. Businesses list AR as current assets on the balance sheet.
Accrual method The accrual method is a system of bookkeeping that matches related revenues and expenses and records them when the transaction occurs, rather than when cash changes hands. For example, a sale made on credit would be recorded to income immediately, even though the company has not received cash payment for the sale. Certain related expenses, such as the cost of goods, would also be recorded, even if those were paid for in a prior period. The accrual method is also called accrual accounting or accrual basis accounting. Large businesses commonly use this method.
Accrued Interest Accrued interest is unpaid interest that accumulates on the principal balance of a loan, adding to the total amount owed in a loan.
Accrued market discount Accrued market discount is the rise in the market value of a discounted bond that occurs as its maturity date approaches. For example, a bond with a face value of $100 might be purchased for the discounted price of $50. Over time, the market value of this bond will gradually rise from $50, reaching $100 at the maturity date, when it’s redeemable for the full face value. This increase in market value is not related to a change in market interest rates.
Accumulation Accumulation refers to the investment practice of buying securities over time, while reinvesting dividends and related income, with the objective of building a sizeable portfolio. With reference to corporations, accumulation can mean the reinvestment of earnings to fund business growth.
Accumulation period Accumulation period is the timeframe during which an individual contributes regularly to a retirement plan that will provide income payments at some future date. The term is typically used in reference to deferred annuities.
Accumulation phase Accumulation phase is the timeframe during which an individual contributes regularly to a retirement plan that will provide income payments at some future date. The term is typically used in reference to deferred annuities.
Accumulation plan An accumulation plan is the investment practice of buying securities over time while reinvesting dividends and related income, with the objective of building a sizeable portfolio. The term is generally used in reference to retirement investing.
Accumulation unit An accumulation unit measures the value of contributions made to a variable annuity account and documents a contributor’s share of participation in that account. The term is also used to measure shares of funds within a unit trust; those shares, or units, can either be reinvested or issued to the investors in the trust.
Acquiring financial institution An acquiring financial institution is contracted by a merchant to facilitate the merchant’s acceptance of credit card payments. The acquiring financial institution acts as the go-between in the transaction, collecting funds from the card company and depositing funds in the merchant’s account.
Acquisition fee A charge in most auto leasing companies for originating the loan, just as mortgage lenders charge points as an origination fee. This could be called a bank fee or an administrative fee and can be paid up front or it is included or �¢ �¬��rolled into’ the gross cost. This fee covers items like obtaining a credit report, entering the lease in the data system, and general administrative task involved with assessing the loan.
Acquisition indebtedness A loan you get to build your house, a loan to buy your house or any loan you take out to facilitate major home improvements. The interest that you pay on such a loan is, in most cases, tax-deductible.
Acre An acre is a unit of measurement for land that is equal to 43,560 square feet.
Acre foot An acre foot is a unit of volume used to measure large bodies of water. An acre foot is equal to 43,560 cubic feet, or roughly 325,851 gallons. This volume of water will cover one acre of land at a depth of one foot.
ACRES (accelerated cost recovery system) Commonly referred to as ACRS (pronounced “acres”), a method of depreciating property rapidly for tax purposes. ACRS property is divided into classes and each class has a predetermined time period over which it may be depreciated. ACRS generally is used for property placed in service after 1980 and by Dec. 31, 1986. The modified system that has replaced ACRES is known as MACRS, or Modified Accelerated Cost Recovery System.
ACRS ACRS is the abbreviation for accelerated cost recovery system, a depreciation method that was introduced and defined in the Economic Recovery Tax Act of 1981. ACRS allows for rapid depreciation (for tax purposes) of property placed into service between 1981 and 1986.
Active income Active income is money earned for services, including salaries, wages, tips, and commissions. Business profits are considered active income only where there is material participation in the business operations.
Active Investing Active investing is the practice of constantly buying and selling securities in order to profit from temporary conditions that cause short-term pricing and value changes.
Active participation Active participation is an IRS-defined level of involvement in the management of real estate properties that determines how the rental income from those properties is taxed. Active participation is a lesser level of involvement than material participation.
Actual age Actual age is a real estate appraisal term refering to the number of years that have passed since a specific building improvement was made. An improvement’s actual age is often compared to it’s effective age.
Actual cash value Actual cash value is the replacement cost minus depreciation of a specific item of personal property. It’s essentially the value for which the item could be sold, which is often less than what it would cost to replace it. Insurance companies sometimes use actual cash value to determine what to pay a policyholder after loss or damage to insured property.
Actual Return Actual return is an investor’s real gain or loss on a portfolio.
Actuarial Risk Actuarial risk is the danger that the computations used to generate insurance probability estimates are based on inaccurate assumptions. These probability estimates are used to price insurance policies at a level that allows the insurer to make expected payouts while continuing regular business operations. If the underlying assumptions are wrong, the insurer could face serious financial consequences.
Actuary An actuary is a mathmetician who specializes in evaluating risk and setting premium prices for insurance companies.
Ad valorem tax A tax based according to item value only, usually property tax based on the just or fair market value of the property. This tax can also be imposed on as a duty on imported items. Property ad valorem taxes are a major source of revenue for state and municipal governments.
Addendum An addendum is an addition or supplement, often to a book. In the legal sense, an addendum is a clarification or change made to a contract.
Additional living expense insurance Additional living expense insurance is coverage that provides payment to the insured for extra costs resulting from being temporarily displaced from an insured property due to damage. This coverage is typically provided as part of a homeowner’s or renter’s insurance policy.
Additional monthly benefit Additional monthly benefit is an extra payment provided in the event of an injury under a disability income policy. Typically, the extra monthly amounts are provided before the injured party begins receiving Social Security benefits.
Additional principal payment An additional principal payment made towards the principal balance of a loan. This can enable the borrower’s future interest payments to be reduced. In amortized loans, such as most mortgages and auto loans, most of the early payments go toward principal. If you can make at least one extra payment a year, you can cut the length of a loan by as much as a quarter.
Add-On Certificate of Deposit An add-on certificate of deposit (CD) gives the depositholder the right to roll additional funds into a time deposit, so that those additional funds will earn the same interest. Traditional CDs don’t allow for additional deposits between the purchase and expiry dates.
Add-on Interest Interest that is computed at the beginning of the loan, then added to the principal, so that all must be repaid, even if the loan is paid off early. The result of this is interest charges that can be double that of the stated simple interest rate.
Add-ons Add-ons are optional features that enhance a base model automobile. Examples include an anti-theft device, sunroof, upgraded audio system, and custom-look wheels.
adjustable rate An adjustable rate is a rate of interest paid on outstanding debt (often a mortgage) that can fluctuate. Generally, adjustable rates are defined relative to an underlying variable index, as in 30-day LIBOR plus 1.50%.
Adjustable rate mortgage (ARM) The ARM is a loan secured on property whose interest rate and monthly repayments vary over time. The variations in ARM usually correspond and depend on the flucatuations of a pre-determined index. Due to its nature, it is also known as the Variable Rate Mortgage or the Negotiable Rate Mortgage.\\n\\nSee further Adjustment date, Convertible ARM, Fixed rate mortgage
Adjustable-rate mortgage An adjustable-rate mortgage, or ARM, is a form of financing secured by real estate which carries an interest rate that may change over the life of the loan. The interest rate on an ARM is defined as a variable financial index plus or minus a margin, such as “1-year Constant Maturity Treasury plus 2.5%.”
Adjusted balance Adjusted balance is a method used to calculate monthly finance charges, usually on a revolving credit card account. The formula uses the end-of-period account balance, after all credits have been posted, to calculate the finance charges. Other methodologies include average daily balance and previous balance method.
Adjusted balance method The adjusted balance method is used to calculate monthly finance charges, usually on a revolving credit card account. The formula uses the end-of-period account balance, after all credits have been posted, to calculate the finance charges. Other methodologies include average daily balance and previous balance method.
Adjusted Basis The cost of a property plus the value for improvements to the property minus any depreciation taken.
Adjusted cost basis Adjusted cost basis is the value of an asset, reflecting the amount paid for the asset plus improvements made and less depreciation.
Adjusted exercise price Adjusted exercise price is the price at which an option can be bought or sold, taking into consideration any underlying stock splits. Specific to put and call options on Ginne Mae contracts, the exercise prices on these options are adjusted so that different pools of mortgages have the same value to investors, even when their coupon rates differ.
Adjusted funds from operations – AFFO Adjusted funds from operations, or AFFO, is a non-GAAP measure designed to measure a real estate income trust’s, or REIT’s, residual cash flow. This is important because REITs use residual cash flow to pay shareholder dividends. There are many ways to calculate AFFO, but a common formula is funds from operations (FFO) less maintenance capital expenditures.
Adjusted gross income – AGI Adjusted gross income, or AGI, determines the federal tax liability of an individual or married couple filing jointly. Income includes salaries, wages, and other earned amounts, plus investment income and business profits. Adjustments to income might include qualified retirement contributions,   business expenses, etc. AGI is income less these qualified adjustments.
Adjustment bureau An adjustment bureau is an organization that provides assistance in the management of insurance claims and financial dealings, often on behalf of bankrupt debtors.
Adjustment date The interest rates on Adjustable Rate Mortagage change periodically. The date on which this change occurs is called the adjustment date.
Adjustment frequency Adjustment frequency refers to how often the interest rate on an adjustable-rate mortgage (ARM) can be reset. Most ARMs have an adjustment frequency of one year, meaning that the rate would be adjusted once annually.   Longer or shorter adjustment frequencies are also available.
Adjustment Interval The adjustment period or interval is the time between changes in the monthly payment or the interest rate on an adjustable rate mortgage (ARM).Most mortgages come with an adjustment period of 1, 3, 5, or 7 years. This means your interest rate is fixed for that amount of time. After that, the interest rate can adjust up or down, depending on the market.
Adjustment period Adjustment period refers to how often the interest rate on an adjustable-rate mortgage (ARM) can be reset. Most ARMs have an adjustment period of one year, meaning that the rate would be adjusted once annually.   Longer or shorter adjustment periods are also available.
Affordability An estimate as to how much a person can afford in order to purchase a home. Affordability gives the consumer a possible price that they could be approved for and also gives the amount they will be required to pay for their mortgage payment.
Aggregate Adjustment An aggregate adjustment determines the amount of money placed in a borrower’s escrow account at closing. An aggregate adjustment works to ensure that the borrower’s escrow account maintains the necessary balance throughout the year; particularly when taxes and insurance are paid.
Amenity a feature of the home or property that serves as a benefit to the buyer but that is not necessary to its use; something that contributes to the physical or material comfort. Having amenities will increase the value and attractiveness of a piece of property, or a location.
Amortization A payment to pay of part of a debt or a loan. This payment is usually periodical. Given that the monthly payment exceed the interest payment for a period, the debt balance or remindning loan balance, is decreasing.\\nIn some cases there is a anuity payment plan, that is there is equal payments per period. In this case the amortization part of a payment is the part of the payment that is used to pay off a part of the debt. The remaining part of the payment for the period is paid for the interest accrued on the loan. A loan is amortized over a period in order to have it paid off (fully or partly) over the loan period.\\nIn you payment plan for a mortgage or loan you will find the amortization part, as well as interest part, per month (or period). In the case with fixed mortgage interest rates the amortization part is fixed and predictable. In the case with adjustable mortgage interest rates, the total payment may vary over time, as may the actual amortization in some cases depedning on type of mortgage or loan. However, typically there is a amortzation plan that let you know exactlu how large your remaining debt will be at the end of each month (period). Se further Amortization Schedule and Amortization Term.\\n
Amortization schedule It is a comprehensive schedule of payments tabling the break up of the mortgage amount, interest amount, principle received, and balance due through each period of loan till the loan balances reaches nil.
Annual percentage rate (APR) It is an expression of the effective rate of interest that will have to be paid on a loan. It is taken as a percentage and calculated as a yearly rate.   It is usually different and higher than the advertised rate because it includes one time fees and other costs which help to determine the total cost of borrowing. It is a measure to compare different loans offered by competing lenders taking into account both interest rate and closing fees. It is essential to know the total amount of fees involved as different lenders have different set of fees included in the APR. As a rough guide to calculating the apr, first deduct the fees from the loan amount. Then calculate the interest rate on the actual loan payment amount instead of the actual loan amount. The amount will be a number close to your APR.
Application An application is a form poularly known as Form 1003. It is needed to apply for a mortgage and provides information about the prospective borrower/mortgagor like his savings, income, assets, debts as well as the security to be offered.
Appraisal It is an estimated value of a property, based on a analytical comparison of similar saleable property.\\n\\nSee further Apprasier, Assessment, Fair market value
Appraisal Fee The fee charged by a certified appraiser to render an opinion of market value of property. This fee is paid to an outside appraisal company to objectively determine the fair market value of your property. This fee can vary depending on the item being appraised and the geographical location.
Apprasier A qualified professional who has had the necessary academic expertise, training and experience to give a fair estimation of the value of real and personal property.\\n\\nSee further Appraisal, Assessment
Appreciation It is the rise in the value of property because of fluctuations in market conditions and other causes like inflation, costs and standard of living.
Arbitration A nonjudicial attempt to resolve a controversy using a neutral third party. By making arbitration a condition of the loan contract, many lenders impose arbitration on consumers.
Assessment The assigning of an approximate taxable value on a property for a specific purpose.\\n\\n See further Appraisal, Assessment, Appraiser
Asset Any property or possession so owned by an individual that has monetary value is an asset. They include real estate, personal property and debts owed to the individual by others. Liquid assets are those which can be quickly converted into cash like bank accounts, stocks and shares, bonds, mutual funds etc.
Assignment The handing over or transfer of ownership of one’s mortgage be it a company or individual to another is an assignment.
Assumable mortgage A loan that allows a home buyer to take over a seller’s mortgage when purchasing a home. The borrower must qualify to assume the loan. When you assume a mortgage you inherit both the interest rate and monthly payments. It can save you money if the exsiting interest rate on the mortgage is lower than the current market rate and closing costs are avoided as well. If the loan comes with a stipulation that the mortgage has to be repaid upon the sale of property then it is not termed as assumable.
Assumption Assumption is an agreement between the buyer and seller   where a buyer assumes a seller’s mortgage and takes over the payments on the exisiting mortgage. This is a big saving for a buyer as it does not entail the clsoing costs and high interest rates of a new mortgage. It is not very popular anymore and the Buyer should be wary.
Automated Valuation Model (AVM) This provides computer generated home appraisals for mortgages. AVM mortgage appraisals are designed to replace the work completed by licensed real estate appraisers. Most lenders use AVM mortgage appraisals to speed up the process and reduce costs. There is controversy debating whether this is a good implementation for evaluating property and its accuracy when compared to using an appraisal management company or AMC.
Avigation easement An avigation easement grants aircraft the right to fly, land, or take off in unobstructed airspace above a parcel of real property. Such an easement often prohibits the property owner from installing structures that exceed a specified height. The easement also provides for outcomes typically associated with aircraft by allowing for the right to make noise and generate dust.
Award letter An award letter is the written notification provided to a prospective college student from a financial aid office detailing the amount and type of financial aid for which that student has qualified.

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B/C Loan B/C loan refers to the class of debt facilities provided to borrowers with less-than-optimal credit qualifications. B/C loans have higher interest rates and more restrictive terms due to the higher level of risk involved for the lender. A credit-challenged borrower can use a B/C loan to establish a reliable payment history, thus improving his or her credit profile.
Back title letter A back title letter is an official document produced by a title insurance company that specifies the condition of a property’s title (i.e., who owns the land, and if there any liens or restrictions exist) as of certain date.
Back to back escrows A closing arrangement that is set up so that the buyer can finalize the purchase of one property and the sale of another simultaneously.
Back-door trojan A back-door trojan is malicious code or software that’s hidden within another program. When the program is installed on a computer, the trojan code activates remote access to the system, so that a hacker can gain entry to the computer and its files. This remote access gives the hacker the ability to manipulate files and view confidential data, among other things.
Back-end load Back-end load is a sales charge that’s assessed when an investor sells mutual fund shares. These charges are usually structured to discourage frequent trading; the fee is highest in the first year of share ownership, and decreases as the shares are held for longer periods.
Backend ratio A ratio that indicates what portion of a person’s monthly income goes toward paying debts, mortgage, credit cards, car payments, student loan. Traditionally, lenders were loath to extend borrowers’ back-end ratios past 36 percent, but they often do now. Lenders use this ratio in tandem with the front end ratio to approve mortgages. This is also known as a debt to income ratio.
Back-end ratio The back-end ratio is the percentage of an individual’s (or household’s) pre-tax, monthly income that’s used to pay monthly debt obligations. Debt obligations include the mortgage payment, real estate taxes, mortgage insurance, and all credit account payments, including credit cards and car loans. The ratio is calculated by adding up the debt obligations and dividing the sum by the pre-tax monthly income.
Back-end ratio or back ratio The back-end ratio is the percentage of an individual’s (or household’s) pre-tax, monthly income that is used to pay monthly debt obligations. Debt obligations include the mortgage payment, real estate taxes, mortgage insurance and all credit account payments, including credit cards and car loans. The ratio is calculated by adding up the debt obligations and dividing the sum by the pre-tax monthly income.
Back-to-back escrow A back-to-back escrow is arranged so that a homeowner can sell one property and purchase another simultaneously. This arrangement is useful in cases where the homeowner can only carry one mortgage at a time.   Back-to-back escrow allows for the transition from an existing mortgage on the property that’s being sold directly to a new mortgage on the purchased property. Including a back-to-back escrow contingency in a home purchase offer makes the offer less appealing to the seller.
Back-to-back loans Back-to-back loans are debts exchanged between two companies for the purpose of hedging against foreign exchange rate fluctuations. Two companies in different countries would borrow corresponding amounts from one another.   A U.S. company, for example, would loan a specified amount in dollars to a Japanese company, and the Japanese company would loan the U.S. company an equivalent amount in yen.
Backup offer A bid for a property that the owner will consider if the current transaction falls through. If your bid for a house comes in second, be sure to make a backup offer. This will put you in line if the first offer falls through.
Backup withholding Backup withholding is income tax collected on various types of 1099 income, including investment income. At the time the income is received, or when an investor withdraws funds from an investment account, the payer holds back a percentage of funds to ensure that the appropriate tax liability is paid when the tax becomes due after the close of the tax year.
Bad debt Bad debt refers to funds owed to a creditor that aren’t collectible. Debts are only classified as bad debt after all avenues of collection have been exhausted. From a business/balance sheet perspective, bad debt amounts are worthless, and usually written off. From a tax perspective, businesses and individuals are allowed to deduct bad debts under certain circumstances.
Bad debt reserve A bad debt reserve is a balance sheet account that estimates the amount of non-collectible debts that a company expects to experience.
Bad debts Bad debt refers to funds owed to a creditor that aren’t collectible. Debts are only classified as bad debt after all avenues of collection have been exhausted. From a business/balance sheet perspective, bad debt amounts are worthless, and usually written off. From a tax perspective, businesses and individuals are allowed to deduct bad debts under certain circumstances.
Bailing out Bailing out is the process of providing funds to an individual or company that would otherwise become insolvent. The term can also refer to the act of selling a security impulsively at any price in a crashing market.
Balance the dollar amount that is left to be paid on a loan.
Balance sheet A balance sheet is a financial statement that represents a company’s revenue-generating assets, as well as its liabilities and net worth. Balance sheets are used to evaluate a company’s financial strength.
Balance transfer A balance transfer is the movement of a debt balance from one credit card account to another. Credit card companies often try to lure in new customers by offering low interest rates on balance transfers. There may be transaction fees associated with processing a balance transfer.
Balance transfer fee A balance transfer fee is a charge assessed when a debtor moves a debt balance from one credit card account to another. The fee, often a percentage of the debt balance, is charged by the creditor that assumes the debt.
Balanced fund A balanced fund is a type of mutual fund that pursues a hybrid investing strategy. Balanced funds contain a mix of stocks, bonds, and other types of securities in order to offer investors both capital appreciation and income generation.
Balloon loan A long-term loan in which the payments aren’t set up to repay the loan in full by the end of the term. This loan has one large payment due when the loan matures. The type of loan often has a low interest payment. The major disadvantage with this loan is the borrower needs to be disciplined in preparation for the large single payment.
Balloon mortgage It is a short term payment with mortgage payments too low to pay off the balance in the specified time. This loan thus requires payment in full usually a lump sum amount, payable earliear than the normal amortization period by paying the balance in a shorter period of say 5-7 years. For eg. The amortization period can be 30 years, but the payment will be required to be paid in full at the end of a 5 or 7 or 10 year period through a lump sum or balloon payment.
Balloon note A balloon note is a type of long-term loan that defers a large part of the principal payoff until maturity. Balloon notes are characterized by low principal and interest payments during the life of the loan, and one large, final payment due at maturity.
Balloon payment The last and final balance amount of a loan that is paid at the end of a balloon mortgage is called a balloon payment.
Bank A bank is a licensed, commercial entity that accepts and pays interest on deposits, and makes payments as directed by depositors, by way of check-writing and/or debit card usage. Banks may also make loans and provide various other financial services to individuals and businesses.
Bank credit Bank credit is a financial institution’s promise to advance funds, up to a certain limit, on behalf of an individual or business. Those funds may be repaid in the form of structured debt, or by way of funds held on deposit with the bank.
Bank discount A bank discount is interest paid on a loan upfront. The total amount of interest due, based on projected repayment, is deducted in one lump sum from the initial distribution of the loaned funds. The bank discount is expressed as a percentage of the loan amount.
Bank holding company A bank holding company is a commercial entity that owns or operates at least two banks or applicable financial services companies.
Bank rate The bank rate is the interest rate that a central bank (e.g., the Federal Reserve) charges to lend money to its member banks. Changes to the bank rate affect the national money supply by encouraging or discouraging borrowing.
Bank Secrecy Act The Bank Secrecy Act (“BSA”) is legislation that requires financial institutions to document potentially suspicious, high-dollar depositor transactions. The legislation is intended to prevent, or at least discourage, money-laundering activities. The BSA is also known as the Currency and Foreign Transactions Reporting Act.
Bank spread The bank spread is the difference between the bank’s cost of funds, in terms of interest paid to depositors, and the rate the bank charges to debtors on bank loans.
Bank term loan A bank term loan is a debt facility that’s offered by a banking institution to a business. The bank term loan is characterized by a fixed maturity date and a loan life that’s longer than one year. Repayments, which can be monthly or quarterly, most commonly involve some level of principal amortization prior to maturity.
Bank wire The bank wire is an electronic system that banks use to transmit and receive account information and transaction requests from one another.
Banker’s acceptance A banker’s acceptance (also called bankers acceptance or BA) is an order to pay a sum of money at a certain date. The BA is created by a banking customer and provided to a third party. The third party presents the BA to the bank; when the bank “accepts” the BA, it is assuming responsibility to make the specified payment. The BA is now a bank-guaranteed obligation and can therefore be traded on the secondary market. BAs are commonly used in international trade, where parties to a transaction are unwilling to offer credit terms.
Banker’s hours Banker’s hours are the hours of the week that a bank branch is open for business. The term is a remnant from the days when bank branches commonly closed early during the work week and weren’t open on weekends.
Banker’s year The banker’s year has 360 days, rather than 365. The 360-day year simplifies monthly interest calculations by allowing for 12 equal periods of 30 days each.
Banking Banking is the practice of accepting deposits for safekeeping, making payments as requested by depositors and, in many cases, loaning deposited funds for profit.
Bankrupt Bankrupt is the state of being financially insolvent. In the legal sense, an individual or business must be declared bankrupt by a court proceeding.
Bankruptcy It is a leagally declared inability of an individual or organization to pay their creditors. Bankruptcy is filed in a Federal Court. Bankruptcies are of various types. The most common one however, is the ‘Chapter 7 No Asset’ bankruptcy which relieves the individual/borrower of his debts and liabilities. The borrower remains ineligible for an ‘A’ paper loan for a period of two years after the bankruptcy has been discharged. He is also required to re-eatablish the ability to reapy debt.
Bankruptcy code Bankruptcy Code is another name for United States Code Title 11-Bankruptcy, the federal legislation governing bankruptcy proceedings.
Bankruptcy trustee A bankruptcy trustee is the person who’s assigned to represent creditors’ interests in a Chapter 7 or Chapter 13 bankruptcy proceeding. The trustee’s responsibilities include reviewing the debtor’s assets, and reviewing claims of exemptions, among other things. Trustees are appointed and managed by the United States Trustee, but are not government employees.
Bargain element The bargain element is the implied gain that an investor earns when exercising a stock option, i.e., the difference between the fair market value of a stock on the day the option is exercised, and the strike price, multiplied by the number of shares. For tax purposes, the bargain element is treated as income and not as a capital gain.
Bargain sale The transferring or purchasing of property or an item for less than market value.
Base interest rate The base interest rate is the lowest rate an investor will tolerate for a non-Treasury security. Because Treasury securities are considered no-risk investments, the base interest rate would be greater than the rate offered by Treasury securities of the same maturity.
Base loan amount The initial loan amount upon which loan payments are based. Other charges, such as interest may be added to the initial amount during the lifetime of the loan.
Base price The base price is the sales value of a vehicle that has no options. Base price includes the car’s standard equipment and warranty, but doesn’t include the cost of any upgrades, or optional dealer services. Auto dealerships list a vehicle’s base price on the window sticker.
Base rate The base rate is the percentage of fees banks charge their most qualified borrowers. The term is typically used in the U.K., and is similar in definition to the prime rate in the U.S.
Basis Basis is the purchase price of an investment, minus commissions and purchases expenses. The basis is an important component in the calculation of capital gains or losses for tax purposes. In reference to IRAs, the basis is the balance within an IRA representing nondeductible contributions. Basis can also mean the difference between a commodity’s cash price and its shortest duration futures price.
Basis point A basis point is 1/100th of 1 percent. The basis point is often used in reference to interest rates. If the Fed decreases the prime rate from 7.50 percent to 7.25 percent, the rate is said to have gone down 25 basis points.
Bearer bond A bearer bond is a debt investment that doesn’t have a registered owner, but is considered the property of whoever has it in his or her possession. The bond may have attached coupons that must be submitted to the bond issuer in return for interest payments.
Bearing wall A bearing wall supports the weight of a structure. In a one-story home, for example, the bearing walls primarily support the roof. Bearing walls can’t be removed without affecting the structure’s stability.
Bedroom community A suburban community in which the residents commute to the city to work. These communities do not support their own employment centers for its residents so the people are said to only sleep there after commuting to a larger city to work the majority of the time. Often, people chose to live in one of theses communities because of affordability, good schools, and low crime rates.
Before-tax income Before-tax income is the gross earnings of an individual or company prior to the deduction of taxes.
Beneficiary A beneficiary is any individual or legal entity that’s named as an inheritor of funds or property in a bank account, trust fund, insurance policy, will, or similar financial contract.
Benefit offset Benefit offset is a withholding of a percentage of retirement plan benefits. If a retirement plan member owes money to the plan and is receiving benefit payments from another source, the U.S. Social Security Act allows for a benefit offset of up to 10 percent of that member’s benefits.
Benjamin Graham Benjamin Graham (1894-1976) was an economist, investor, author, and adjunct professor. Considered one of the first experts in security analysis, Graham published The Intelligent Investor in 1949. Notably, Warren Buffet was one of Graham’s students at Columbia University.
Bequest Bequest is the act of giving property to a beneficiary in a will. The term can also refer to the bequeathed property.
Best efforts mortgage lock A best efforts mortgage lock allows a mortgage originator to obtain a preliminary commitment on selling a mortgage loan into the secondary market for the purposes of pricing the mortgage for the applicant. While the mortgage originator must make his best effort to close the loan and deliver it to the buyer, the originator is not contractually bound to deliver the loan to the buyer.
Betterment Betterment, in reference to real estate, is an addition, improvement, or modernization that adds value to the property.
Bidding War Multiple and offers made in order to compete for a piece of property or item that escalates the price. A bidding war can happen over real estate, a business, a corporation, Hollywood movie scripts, or smaller items. This is usually great news for the seller as they will make out with a much higher price than originally anticipated.
Biennial ownership Biennial ownership refers to a type of timeshare ownership in which the owner may use the timeshare unit every other year.
Bilateral contract A bilateral contract is a legal document that binds both parties to perform a specific action. A property purchase contract, for example, binds the seller to transfer property to the buyer, and the buyer to provide funds to the seller.
Bill of Sale the document that concludes the transfer of new property.
Bill presentment Bill presentment is an Internet-based system that facilitates the creation, management, and payment of bills online. The service is primarily used by commercial entities in a wide variety of industries.
Billing cycle Billing cycle refers to the length of time that passes between statement dates. For credit cards, the billing cycle is commonly one month.
Billing statement Billing statement is periodic account summary sent by a company to customers who’ve had account transactions during the billing period. Credit card companies issue monthly billing statements, which itemize the transactions within the billing period as well as the finance charges, minimum payment due, and payment due date.
Bi-monthly mortgage A bi-monthly mortgage allows the borrower to make half of the scheduled payment twice each month, for a total of 24 annual payments. If the monthly payment is $2,000, for example, the borrower would make two payments of $1,000 during the month, rather than one payment of $2,000. This reduces total interest costs associated with the mortgage because the principal balance will be reduced every two weeks instead of just once monthly.
Biweekly mortgage A mortgage that schedules payments every two weeks instead of the standard monthly payment. Typically your bank account ids debited every two weeks in the amount of half of your mortgage. In a normal mortgage you make 12 payments, on the biweekly repayment system you will be making 26 half payments a year. The 26 payments is equivalent to 13 monthly payments. This extra payment helps amortize your loan faster, which saves you money in interest.
Bi-weekly mortgage A bi-weekly mortgage is structured so that the borrower makes half the scheduled monthly payment every two weeks, for 26 annual payments. The bi-weekly structure reduces total interest costs because each year, the borrower is making the equivalent of 13 monthly payments rather than 12.
Blanket insurance Blanket insurance provides several types of coverages under one policy. For example, a blanket policy might cover more than one property type at one location, or two separate properties at two separate locations. There are homeowner’s blanket policies that cover the dwelling as well as the insured’s personal property.
Blanket lien A blanket lien provides the creditor with rights to almost all of a debtor’s assets. This is different from a conventional lien, which only provides the creditor with rights to a specific asset.
Blanket mortgage A blanket mortgage is a loan which land developers most commonly use to purchase an area of land with the intention of dividing it into many separate lots for resale or development. Rather than mortgaging each lot separately, a blanket mortgage can be used to reduce costs and make the transactions more time efficient.
Blanket recommendation A blanket recommendation is buy or sell advice given by a brokerage to its customers. This recommendation may pertain to a particular security, security type or industry, and does not consider a individual investor’s objectives or current holdings. A blanket recommendation is the equivalent of saying something like, “Acme Company stock is undervalued right now, so it’s a good time to buy.”
Blended rate A blended rate is the weighted average interest rate of a loan that charges one rate for part of the debt, and another rate for another part of the debt. In the case of a cash-out mortgage refinancing, some lenders might offer to extend one rate on the portion of the debt that’s already outstanding, and a separate rate on the cash-out part of the loan. The weighted average of the two rates would be the loan’s blended rate. Blended rate can also refer to the weighted average rate of a homeowner’s first and second mortgages.
Blind trust A blind trust is a legal arrangement for holding and/or managing money or other assets for one or more beneficiaries, where the beneficiaries aren’t privy to any information about the assets within the trust.
Block tuition Block tuition programs charge full-time college students one flat price for all courses taken within a semester. This is different from conventional tuition, which charges students by the number of course units taken.
Blue Book The Blue Book, also called Kelley Blue Book, is a printed valuation guide that assists vehicle owners, auto dealers, and insurance companies in determining the market value or sales price of a vehicle.
Blue Collar Blue collar describes an individual or class of individuals who are employed in manual labor trades and earn hourly wages.
Blue sky laws Blue sky laws are securities regulations passed by individual states. These regulations impose certain registration and filing requirements on issuers of securities in an effort to protect investors from securities fraud.
Blue-ribbon condition Blue-ribbon condition describes a home or other asset that’s in excellent form, with no signs of wear.
Board Certified In Estate Planning – BCE Board Certified In Estate Planning, or BCE, describes an individual who has satisfactorily completed an industry-recognized course in estate planning. The Institute of Business & Finance (IBF) provides this course for financial planners and financial advisors.
Board foot A board foot is a cubic measurement typically used for lumber. One board foot is the equivalent of an item that is 1 foot long by 1 foot wide by 1 foot thick.
Board of equalization A government agency, typically governed by each state that hears appeals of property classifications. People appeal to a board of equalization because they believe their property has been assessed too highly, which increases their property taxes unfairly.
Boilerplate Boilerplate describes standardized language that’s used within a legal document. Any individual or company that frequently engages in contracts or agreements is likely to use boilerplates to avoid the expense of having each new contract reviewed and approved by legal counsel.
Bona fide Bona fide is Latin for “in good faith.” It’s used as a synonym for genuine, original, or without fraud.
Bond A bond is a loan that’s sold in shares as a security. Corporations and government entities sell bond shares to raise money for special projects, expansion, or simply to cover budgeted expenses. One who purchases a bond is called the bondholder. The terms of the bond specify when and how the bond issuer will repay the principal to the bondholder.
Bond Buyer’s 20-bond index Bond Buyer’s 20-Bond Index is a representation of municipal bond trends based on a portfolio of 20 general obligation bonds that mature in 20 years, with an average AA rating. The index is based on a survey of municipal bond traders rather than actual prices or yields. The 20-Bond Index is published by The Bond Buyer, a daily financial publication.
Book A book is a listing of long and short positions held by a trader of securities.
Book value Book value is the cost of an item or capital asset plus the cost of additions, less depreciation. In the case of financial records, book value is the net amount attributed to an asset on a balance sheet. The term can also refer to the net worth of a company’s common stock equity.
Boomerang Boomerang refers to an adult of the baby boomer generation who lives with his or her parents after a period of living independently. The term is slang, primarily used in America.
Boot Boot is anything of value that has been included in a trade to even up the transaction. A vehicle trade-in is the most common example: The trade isn’t even unless you turn in the used vehicle plus cash (the boot) to pay for the new vehicle.
Borough A borough is a town that’s incorporated, or an administrative unit designating a community or area. New York City has five boroughs: The Bronx, Brooklyn, Manhattan, Queens, and Staten Island.
Borrow To borrow is to obtain money or property with the intention of returning it at some later date. In terms of finance, to borrow is to draw against a loan, which usually must be repaid with interest.
Borrow pit A borrow pit is a ditch or hole where soil has been dug out for use in another location. The term is used in the context of construction projects.
Borrower A borrower is an individual or entity that receives loaned funds or property and is required to return those funds or property at some future date. In the financial sense, a borrower is one who draws money from a credit facility, and is contractually obligated to pay back the principal plus interest.
Bot Bot is a shortened form of robot. The term refers to a computer program that can execute commands autonomously. Bots can be used to record and collect private information from another’s computer.
Botnet A botnet, short for robot network, is a group of computers that are being exploited to distribute spam and/or viruses. These computers have been infected with a trojan that receives commands from the third-party which controls the botnet.
Bounce protection Bounce protection is an expensive form of overdraft protection offered to a bank’s checking accountholders. The service is similar to an overdraft line of credit, except that the bank reserves the right to refuse overdraft coverage at any time without prior notice.
Bounced check A bounced check is a check that the bank has returned unpaid because there aren’t sufficient funds in the associated account to cover the amount of the check.
Boundary A boundary is a border or a limit. In real estate, a boundary is the meeting point of two properties, where one property ends, and the next begins.
Breach of contract A breach of contract is a failure of one party to perform as required by a legal agreement. A breach of contract generally gives the non-violating party the right to pursue legal recourse. Breach of contract is also called default.
Breach of covenant Breach of covenant is the failure to perform a promise made, usually within a contract.
Breach of warranty A breach of warranty is a violation of a sales agreement that pertains to the condition or title of the item or property being sold. In real estate, a breach of warranty occurs when the seller is unable to transfer clear title of property to the buyer.
Break the buck Break the buck, pertaining to money market mutual funds, is when the fund’s share price drops below $1. If a fund breaks the buck, the investors stand to lose principal.
Break-even point Break-even point is the moment in time when the outlay of expenses has been recovered through sales. In business, the term is used in evaluating capital projects; decision-makers want to know long it will take to recoup expenses if a project is implemented. In options or securities transactions, the break-even point is the price at which the cost is equal to the net proceeds.
Breakup value Breakup value is an estimate of what a company’s total market capitalization would be if its divisions were separately operated, separately traded companies.
Bridge financing Bridge financing is short-term debt that’s collateralized by one asset to fund the purchase of another asset. When the collateral is sold, the debt must be repaid. Bridge financing is used in real estate transactions where a homeowner is purchasing a new home before the old home is sold.
Bridge loan A bridge loan is the short term source of funds needed to pay for purchase of new property when you have not yet sold your previous property. Thus a bridge loan is taken out to supplement this shortfall in cash reserves for a downpayment. To qualify for this, the borrower must have a contract to sell the exisitng house. It is also known as the swing loan. Bridge loans are not used very often now as the second mortgage lenders lending at high value loans are increasing and sellers prefer offers from buyers who have already sold theri property.
Broker A professional who is in the business of bringing two parties together and assisting in arranging funds, negotaiting contracts for the clients. He does not lend the money himself but instead earns a fee or commisssion for every transaction that he conducts. Brokers have different meanings for different situations. Realtors are agents who sometimes do their own broking or often work under brokers.
Broker loan A broker loan is debt extended to an individual or company (the broker) that trades securities on another’s behalf. Brokers might use the funds to fund customer margin accounts (where a customer makes an investment purchase on credit) or to fund the broker’s own investment purchases.
Broker loan rate Broker loan rate is the rate of interest, or finance charges, expressed as a percentage of the total debt, that a broker must pay when borrowing money to fund customers’ margin accounts.
Broker premium An amount of money paid to a mortgage broker who has served as a middleman in the mortgage process between the lender and the borrower. Lenders offer brokers wholesale rates and brokers add a surcharge to cover the cost of underwriting.
Broker Price Opinion – BPO Broker price opinion, or BPO, is the market value of a real estate property, as estimated by a real estate professional. A BPO is not an appraisal; it’s an educated determination of value based on sales trends, condition of the property, and recent sales prices of similar properties.
Brokerage The office of a broker who earns a commission from bringing together a buyer and a seller in real estate or mortgage lending.
Brokerage (brokered) CD A brokerage, or brokered, CD is a time deposit sold to individual investors by a brokerage firm, and can be traded on the secondary market.   An investor might sell the CD prior to maturity without an interest penalty, but the sales price will depend on the time remaining until maturity, as well as other factors.
Brokerage account A brokerage account is a deposit of securities assets held with a brokerage firm. The brokerage firm is an entity that buys and sells securities, for a fee, on behalf of its customers.
Brokered CD A brokerage, or brokered, CD is a time deposit sold to individual investors by a brokerage firm, and can be traded on the secondary market.   An investor might sell the CD prior to maturity without an interest penalty, but the sales price will depend on the time remaining until maturity, as well as other factors.
Broom clean Broom clean refers to the   desired state of a property that’s to be transitioned to a new tenant or buyer. Trash should be picked up and the floors should be swept.
Bubble In economics, a unsustainable increase in the price of certain products or assets, such as housing or stocks, based on mistaken assumptions about their underlying worth. By definition, bubbles are followed by sharp price declines when the bubble bursts, which is the difference between a bubble and a boom.
Buffer strip A buffer strip is an area of natural vegetation lying alongside a stream or roadway that helps minimize runoff and erosion.
Builder Upgrades Refined features and amenities that builders offer for an extra charge.
Building and loan association A building and loan association is a cooperative that assists its members in obtaining financing for real estate purchases and construction.
Building code Codes that architects, builders, and developers use that are in compliance with agreed upon safety standards in a specific area. A building code is a regulation that determines the design, construction, and materials used in building.
Building inspector A building inspector is an employee of the local government’s building department who monitors a building’s construction to ensure that it meets local regulations. The building inspector might also inspect existing structures for ongoing code compliance.
Building moratorium A building moratorium is a postponement or termination of construction activity.
Building permit A building permit is a certificate issued by a local government office authorizing a construction project at a specific location.
Building restrictions Building restrictions are rules governing the physical characteristics of structures on a property.
Built-ins Items, such as appliances and cabinets, which are permanently attached to a building.
Bulk sales escrow A bulk sales escrow is an arrangement that forces a company to run the sale of specified assets through an agent. Those assets might be inventory, or other business assets. The bulk sales escrow protects the interests of unsecured credits by ensuring that asset sales proceeds aren’t spent improperly.
Bullet A bullet is a large principal repayment, typically due at loan maturity. Bullets, which might be 98 percent or more of the loan balance, can be structured into long-term commercial loans that support significant business expansion.
Bullet CD A bullet CD is a time deposit that can’t be called, or paid off, by the issuer prior to the maturity date.
Bullet Loan A bullet loan is a debt facility that has minimal amortization until maturity, at which point a large, lump-sum repayment is due. Bullet loans are typically long-term loans used to fund business expansion.
Bump-up CD A bump-up CD is a time deposit that allows the CD holder to elect to increase the interest rate once during the CD term. Such an increase, however, would only be available if market interest rates move up. Traditional CDs carry fixed interest rates.
Bundle of rights A common explanation explaining how rights pertaining to property are governed. This is a means of organizing and presenting confusing and often times, contradictory data.
Bungalow A bungalow is a home style characterized by a simplistic, one-story design. The bungalow was popular with the North American working class in the early 20th century.
Burden of proof Burden of proof refers to the responsibility, in a lawsuit, to present sufficient evidence for or against disputed facts. In civil cases, the plaintiff has the burden of proof, meaning that it’s the plaintiff’s responsibility to prove his or her case.
Burnout Burnout is a slowdown of mortgage prepayment activity on mortgages that are packaged into a mortgage-backed security (MBS). Mortgagors often prepay the mortgage debt, through refinancing, when interest rates go down. Such prepayment activity is bad for MBS investors, because it reduces future income potential. When an MBS has burnout,   a percentage of the underlying mortgages were not prepaid when rates went down. Investors interpret this to mean that these mortgagors are less likely to refinance if rates drop again.
Business bankruptcy A business bankruptcy is the legal declaration that a business or commercial entity is unable to repay its debts.
Business credit Business credit is any form of debt instrument extended to a commercial entity.
Business finance companies Business finance companies are lenders that specialize in providing credit to commercial entities.
Business interest expense Business interest expense is the total of interest charges incurred by a commercial entity within a financial reporting period.
Bust-up takeover A bust-up takeover is a corporate buyout financed primarily by debt, where the purchaser sells part of the assets of the acquired company to repay the debt.
Buydown Buydown is an upfront cash payment made to temporarily reduce a mortgage interest rate and monthly payment. A seller might fund a buydown as a means of enhancing the deal for the buyer, or to help a buyer qualify for mortgage financing.
Buy-down It is the term used when the lender brings down the rate of interest   on the fixed rate mortgage for a temporary period. For the balance period the borrower’s payment is calculated at note rate. In order to facilitate this, a lump sum payment is made and kept in an account which helps to supplement the borrower’s monthly payments. These funds are sourced out from the seller or elsewhere as an incentive to buy their property. When the initial sum is paid by the lender, it is called the ‘lender funded buydown’. This is possible because the note rate on the loan, tafter taking into consideration all adjustments, is higher than the exisitng market rate. The reason for doing this is that it will help in getting the borrower to qualify for the start rate and thus for a higher loan amount. Also, the borrower maybe expecting his earnigns to increase considerably in the future but would prefer a lower payment right now.
Buy-down mortgage A buydown mortgage is debt secured by real estate property that’s structured with a cash payment upfront to reduce the monthly payment amount for a specified time period.
Buyer broker An agent who represents the buyer and keeps the buyer’s interests and fiduciary obligations in the buyer’s best interest.
Buyer’s agent An agent whose duty it is to get the best possible price and terms for the buyer. This person must disclose all the material facts about the property, good and bad. He or she will also disclose personal facts, if given permission from the seller that will indicate if the seller will accept a reduced price.
Buyer’s market A situation in the real estate market when sellers significantly outnumber buyers, driving prices down. This is historically a good time to buy your home. The conditions are constantly changing.
Buyer’s remorse A buyer’s second thoughts after buying a house or other major purchase, a feeling of anxiety or being overwhelmed by the thought of another financial responsibility.
Bylaws Bylaws are the rules adopted by a corporation that define the roles and responsibilities of shareholders, directors, and officers.

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C

Cafeteria plan A cafeteria plan is a type of employee benefit program that gives employees the ability to choose which nontaxable fringe benefits they will receive. The benefits are funded with pre-tax employee contributions, employer contributions, or a combination of both.
Call A call is a bond issuer’s right to pay off a bond before the scheduled maturity, or a lender’s right to demand full repayment of a loan before the scheduled maturity date. The term can also be used as a shortened version of call option, which is a contract allowing the holder to purchase a security at a certain price for a specific period of time.
Call loan A call loan is a debt instrument that gives the lender the right to demand full repayment prior to the scheduled maturity.
Call money market The call money market provides short-term financing for brokers and dealers. Securities brokers might need such credit to support their own securities purchases, or to support the margin accounts that they provide to their customers.
Call money rate Call money rate is the total annual finance charges, expressed as a percentage of the debt, that banks charge when making loans to brokers. Brokers might use the debt to support margin loans made to their customers.
Call option Call option is a condition provided in the mortgage deed which gives a right to the mortgagee to call the mortgage due and payable at the end of a determined period for any reason.
Callable CD or bond A callable CD or bond can be redeemed by the issuer before the scheduled maturity date. The issuer might choose to call the instrument if interest rates drop, such that redeeming the CD/bond and reissuing a new one would save on financing charges.
Callable loan A callable loan is a debt instrument that gives the lender the right to demand full repayment prior to the scheduled maturity date.
Canada Education Savings Grant – CESG A Canada Education Savings Grant (CESG), is a government grant that encourages Canadian citizens to save for their children’s educational expenses. The grant amount is a percentage of the annual contributions made into a beneficiary’s Registered Education Savings Plan (RESP).
Canada Premium Bond – CPB A Canada Premium Bond (CPB) is a type of savings bond issued by the Canadian government. The CPB pays a higher rate of interest than a standard Canadian Savings Bond (CSB), but it has restrictions on when it can be cashed in. The CPB must be redeemed on or within 30 days of the anniversary of its issue date.
Canada Savings Bond – CSB A Canada Savings Bond (CSB) is a savings bond instrument issued by the Canadian government. The holder of a CSB can cash it in at any time.
Canadian Investor Protection Fund – CIPF The Canadian Investor Protection Fund (CIPF) is a not-for-profit entity that provides account protection to investors, in order to minimize losses if a securities dealer becomes insolvent.
Canadian Mortgage and Housing Corporation – CMHC Canadian Mortgage and Housing Corporation (CMHC) is a government agency that manages several programs to help Canadian households obtain home financing. One of these programs, for example, offers low-cost mortgage insurance to approved borrowers. CMHC also conducts and distributes research on real estate trends in Canada and throughout the world.
Cancellation clause An agreement or provision in a lease or other contract that clearly defines the conditions under which the parties can call off the deal.
Cancellation of debt Cancellation of debt is the writing off of a borrower’s outstanding principal balance, even though payment hasn’t been made. The lender essentially wipes away the debt, and the borrower is free from obligation.
Cap In case of fluctuating interest rates in Adjustable Rate Mortgages, the borrower can exercise a pricing option at the time of application to cap a declining market rate. He is assured that the rates and points exisitng at the time will   not rise with the market rates but neither can they come down if market rates decline. Caps have different terms depending on how often and   when the borrower exercises this option. A cap is costly to the lender and thus costs the borrower more. Some ARMs may have a life cap but permit the interest rate to fluctuate freely for which they require a minimum payment which changes annually. This payment also has its limitations in how much it can change and this limit is also referred to as a cap.
Capacity Capacity is a prospective borrower’s ability, based on income and existing debt load, to make future debt payments. Capacity can also refer to the level of production that a business or geographic entity can support.
Capital Capital is the money or property that a business uses to create revenue. The term can also refer to the total value of a business or individual, in terms of the value of assets owned less any debt.
Capital asset A capital asset is owned property that’s typically used for income generation or value growth. Real estate and securities portfolios are capital assets, as is factory equipment owned by a business.
Capital expenditure The bundle of costs included in making an improvement or upgrade to a property, industrial building, or equipment. It can be anything from a major repair to an existing facility or building a new factory.
Capital gain A capital gain is the increase in an asset’s value, such that it becomes worth more than the purchase price. The gain is known as an unrealized capital gain until the asset is sold. Once the asset is sold and the profit is made, the gain is called a realized capital gain.
Capital gain distribution A capital gain distribution is a payout of realized profits from a mutual fund to its investors. A mutual fund earns capital gains in the same way that an individual investor would, by selling a security for more than the original cost. These realized profits are then paid out to the funds’ investors through capital gains distributions.
Capital gains tax Capital gains tax is an income tax levied on profits earned when an asset is sold for more than its purchase price. Capital gains tax is most commonly associated with profits made on selling shares of stock.
Capital growth strategy Capital growth strategy is an approach to investing where the primary goal is to increase value over a long period of time.
Capital improvement Any structure or other asset permanently added to a property that adds to its overall value.
Capital loss A capital loss results when the value of an asset decreases below the original purchase price. If a share of stock is purchased for $10, and the value subsequently declines to $8, the stockholder incurs an unrealized capital loss. If the stockholder decides to sell the share for $8, the capital loss would then be realized.
Capitalization Capitalization is a measure of a company’s value. It can be calculated as the sum of a company’s long-term debt and equity, or as the stock price multiplied by the number of shares outstanding.
Capitalization rate Capitalization rate is a measurement of annual yield used for property and other capital assets. The capitalization rate is equal to income after taxes, divided by estimated value.
Capitalized (cap) cost Capitalized (cap) cost is a figure representing the base value of a leased asset. Capitalized (cap) cost is used to calculate lease payments on auto and equipment leases.
Captive finance company A captive finance company is a commercial entity that’s wholly owned by another company, and whose business purpose is solely to finance customer purchases of the parent company’s product. A retail chain selling consumer electronics, for example, might own a finance company that solely provides credit accounts to the retail customers who are buying electronics.
Caravan A caravan is a convoy of real estate agents previewing recently listed properties.
Cardholder agreement A cardholder agreement is the written statement of terms that governs a credit card account. The Federal Reserve requires credit card companies to provide cardholders with a cardholder agreement that defines the annual percentage rate, how minimum payments are calculated, annual account fees, and rights of the card holder when billing disagreements arise.
Carport A carport is an unenclosed, roofed area designed for parking vehicles.
Carry back A carry back, or carryback, is the application of a current year’s tax credit to a prior year’s tax liability.
Carry forward A carry forward, or carryforward, is the application of a current year’s excess tax credits to a future year’s tax liability.
Carrying charge Carrying charge is the cost of owning or storing an asset. If the asset is a physical commodity, the carrying charge might include storage costs and insurance. If the asset is a security, the carrying charge might be the ongoing costs of financing the security purchase.
Cash advance A cash advance is a draw taken against a credit account in cash. Most credit card accounts allow for cash advances in addition to purchases, but the rates for cash advances are higher and the terms are more restrictive than those governing purchase transactions.
Cash advance fee A cash advance fee is a charge levied by a credit card issuer when the cardholder draws down cash against a credit account. The fee might be structured as a per-transaction amount, or as a percentage of the amount of cash advanced.
Cash advance rate Cash advance rate is a specific interest rate charged for cash borrowings against a credit line or credit card account. In the case of credit card accounts, cash advances generally accrue interest charges at a higher rate than purchases. Specific rates applied to purchases and cash advances should be spelled out in the cardholder agreement.
Cash back mortgage refinance loan a type of loan that is larger than the remaining balance on your current mortgage. If you refinance with a cash back mortgage, you literally get cash back from the equity that has accumulated in your home. These types of loans are often used for home improvements or tuition.
Cash budget A cash budget is an estimate of future cash inflows (such as customer payments), and cash outflows (such as payments to vendors for inventory and supplies).
Cash cards Cash cards are similar to gift certificates in that they’re purchased for a set dollar amount, and then can be used like cash at certain retailers, restaurants, or service businesses.
Cash collateral Cash collateral is the sum of a borrower’s liquid assets that are used as security for a loan. Cash collateral can also be the cash or cash equivalents of a debtor who has filed for bankruptcy protection.
Cash credit Cash credit is a type of short-term business financing.
Cash flow The amount of cash collected over a certain period of time from an income producing property. This is money that is moving in and out of your business or your investment property which will help establish your business or property’s solvency.
Cash method Cash method is a type of accounting that tracks income as it’s received, and expenses as they’re paid. This differs from accrual accounting, which matches income and expenses in the period when the transaction occurs, rather than when the payment is received.
Cash reserves A cash amount which is determined by the lender which is often required to be held in reserve. This is in addition to the down payment and closing costs. These may be in the form of deposits, money market accounts, or bonds.
Cash surrender value Cash surrender value is the amount of money a life insurance policyholder will receive if he or she voluntarily cancels the policy.
Cashier’s check A cashier’s check is a draft written by a bank and signed by a bank cashier or officer. Cashier’s checks do not bounce, as a personal check might, because the instrument is drawn on the bank, and not on a personal account.
Cashless exercise Cashless exercise is a means of exercising an employee stock option without producing any cash. The optionholder borrows money from a broker to exercise the option, and then directs the broker to simultaneously sell enough shares to repay the borrowed funds.
Cash-on-cash return Cash-on-cash return is a measurement of annual yield most commonly used with respect to investment properties. The calculation is the property’s annual cash rental income divided by the total cash investment (or down payment).
Cash-out refinance This term is used when a borrower refinances his mortgage to obtain a new loan far exceeding the amount of his current loan amount with the intention of using it for personal or other reasons.
Cash-out refinancing Cash-out refinancing is the replacement of an old mortgage with a new and larger one. The amount of the new mortgage left over after paying off the old mortgage goes to the borrower as a lump sum cash payment.
Caveat emptor Latin for “the buyer needs to beware.” It means that the buyer of a property or item buys or invests at his or her own risk.
CD (certificate of deposit) ladder A CD (certificate of deposit) ladder is a portfolio of CDs that mature at regular intervals. An investor would develop a CD ladder to access higher time deposit rates while minimizing the risk of not being able to access cash if necessary.
CD line of credit A CD line of credit is a debt facility that’s secured by a certificate of deposit. If the debtor doesn’t repay the line of credit as agreed, the lender can take the money invested in the CD.
Ceiling The maximum allowable interest rate of an adjustable rate mortgage.
Central bank A central bank is responsible for setting and implementing a political entity’s monetary policy. An example is the Federal Reserve Bank in the United States. The Federal Reserve Bank oversees the monetary policy, issues money, and regulates the banking system, among other things.
Certainty equivalent Certainty equivalent is the rate of guaranteed return an investor would trade for a higher, but less certain, return. The certainty equivalent, which is lower than the riskier rate of return, helps corporate debt issuers determine what level of interest their bonds would have to pay to entice investors.
Certificate of claim A certificate of claim is a borrower’s promise to reimburse a lender if a foreclosure sale of the collateral doesn’t produce enough money to pay back the loan balance and other amounts outstanding in full.
Certificate of deposit (CD) A certificate of deposit, or CD, is a fixed-rate, time deposit issued by banks and other financial institutions. Upon purchasing the CD, the investor agrees to keep the funds on deposit with the CD issuer for a certain period of time. CDs pay higher interest rates than unrestricted cash deposits. Most CDs are FDIC-insured.
Certificate of deposit index Certificate of deposit index, also known as cost of deposit index or CODI, is used as an underlying benchmark for interest rates on adjustable-rate mortgages. The index is an average of the most recent 12 months of three-month certificate of deposit yields, as published by the Federal Reserve Board.
Certificate of deposit index (CODI Index) Certificate of deposit index, also known as cost of deposit index or CODI, is used as a underlying benchmark for interest rates on adjustable-rate mortgages. The index is an average of the most recent 12 months of three-month certificate of deposit yields, as published by the Federal Reserve Board.
Certificate of eligibility This is a document issued by the Veternas Administration to qualified veternas certifying them eligible for a VA loan for home and business. This certificate can be obtained by sending DD-214 (Seperation Paper) to the local VA office along with a VA form 1880   which is a request for Certificate of Eligibility)
Certificate of occupancy A certificate of occupancy designates that a local building authority has inspected a recently built or renovated structure and deemed it safe to be occupied.
Certificate of reasonable value (CRV) The Department of Veternas Affairs (VA) issues this document to establish the maximum amount of loan that can be given for a VA mortgage. It is a VA appraisal expressing the property’s current market value.
Certificate of sale A certificate of sale is issued to the winning bidder at a foreclosure sale. The document indicates that the bidder will receive the property’s title once any conditions of the sale are completed and confirmed by the court.
Certificate of title A certificate of title describes a real estate property and the status of its ownership.
Certificate of use/right to use/timeshare license A certificate of use/right to use/timeshare license documents the certificate holder’s entitlement to stay at a vacation property for a certain period of time.
Certificate of Veteran status FHA form filled out by the VA to establish a borrower’s eligibility for an FHA Vet loan. These documents are obtainable through your local VA office.
Certified Annuity Specialist – CAS A Certified Annuity Specialist (CAS) is a person who’s been trained in the field of fixed- and variable-rate annuities. The designation is issued by the Institute of Business & Finance upon completion of specific course requirements, and is only renewed when the specialist completes a minimum amount of continuing education per year.
Certified check A certified check is a draft that’s guaranteed by the issuing bank. The bank may set aside the amount of the check from the accountholder’s available funds so that the money is not spent before the check is presented for payment. Generally, a bank charges a fee for check certification.
Certified Divorce Financial Analyst – CDFA A Certified Divorce Financial Analyst (CDFA) is a personal finance professional who specializes in divorce. CDFA requirements include a minimum level of work experience, membership in the Institute for Divorce Financial Analysts, and completion of specific coursework. CDFAs may assist in mediation and financial planning among other things.
Certified Financial Divorce Practitioner – CFDP A Certified Financial Divorce Practitioner (CFDP) is a financial professional who specializes in planning for and managing the financial issues surrounding divorce. The CFDP must be a member of the Academy of Financial Divorce Practitioners, and must complete specific coursework before receiving the designation.
Certified Fund Specialist – CFS A Certified Fund Specialist (CFS) is a financial professional who specializes in mutual funds and mutual fund investing. To obtain the CFS designation, an individual must complete self-study training provided by the Institute of Business & Finance.
Certified Senior Consultant – CSC A Certified Senior Consultant (CSC) is a financial planning professional who specializes in assisting seniors. To receive the CSC designation, the professional must complete a self-study course offered by the Institute of Business & Finance. Continuing education is also required in each of the first five years following certification.
Chain of title It is a documented analysis of all transfer titles on properties having taken place from the first one to the most recent.
Change frequency Change frequency is the period of time between scheduled adjustments to the interest rate on an adjustable-rate mortgage.
Change order A change order is a written authorization to amend a contract; the term is commonly used during building construction to document changes to the building plans.
Chapter 10 Chapter 10 refers to the section of the U.S. Bankruptcy Code that defines a type of court protection for insolvent entities. In Chapter 10 bankruptcy filings, the insolvent entity is reorganized by an independent, court-appointed consultant.
Chapter 11 Chapter 11 refers to a section of the U.S. Bankruptcy Code that defines a type of court protection for insolvent entities or individuals. In Chapter 11 bankruptcy filings, the insolvent party is allowed to create and implement the reorganization plan.
Chapter 12 Chapter 12 refers to a section of the U.S. Bankruptcy Code that defines a type of court protection designed for insolvent farms and fisheries. In Chapter 12 bankruptcy filings, the owner of the farm or fishery will negotiate a repayment plan with the bankruptcy trustee and creditors.
Chapter 13 Chapter 13 refers to a section of the U.S. Bankruptcy Code that defines a type of court protection for insolvent individuals. In Chapter 13 bankruptcy filings, the insolvent person is allowed, under supervision, to keep his or her property and repay outstanding debts over several years.
Chapter 7 Chapter 7 refers to a section of the U.S. Bankruptcy Code that defines a type of court protection for insolvent individuals or entities. In Chapter 7 bankruptcy filings, the insolvent entity’s property is sold off, and the proceeds are used to pay creditors. When the insolvent entity is a company, the secured creditors are paid first, followed by unsecured creditors and, lastly, investors.
Chapter 9 Chapter 9 refers to a section of the U.S. Bankruptcy Code that defines a type of court protection for insolvent municipalities. In Chapter 9 bankruptcy filings, the insolvent municipality and its creditors must negotiate a repayment plan.
Character loan A character loan is a debt facility that’s approved on the strength of the borrower’s personal characteristics, such as reputation and credit history, rather than that borrower’s financial qualifications.
Charge card A charge card is a short-term credit account that requires full payment of the balance by the due date. The cardholder isn’t allowed to carry debt balances over into the next billing period.
Charge off A charge off is an expense line item on a company’s income statement. The charge off could be related to uncollectible accounts receivable, or a devaluation of the company’s assets. In order to reduce the balance sheet account in question (i.e., the accounts receivable balance or the book value of a devalued asset), the company must take a charge against its earnings.
Chargeback A chargeback is an adjustment to a credit card account that results from the cardholder’s successful resolution of a dispute with a merchant. The chargeback reverses a charge previously placed on the account. A cardholder would dispute a charge if goods or services purchased were not delivered as expected, or if the purchase in question was unauthorized by the cardholder.
Charge-off A charge-off is an expense line item on a company’s income statement. The charge off could be related to uncollectible accounts receivable, or a devaluation of the company’s assets. In order to reduce the balance sheet account in question (i.e., the accounts receivable balance or the book value of a devalued asset), the company must take a charge against its earnings.
Charitable contribution deduction A charitable contribution deduction is a tax break earned for donating funds or items to a qualified charity. The charitable contribution deduction is reported as an itemized deduction on a tax return.
Charitable donation A charitable donation is a gift of money or property that’s given to a nonprofit organization or charity. Many nonprofit organizations rely on charitable donations for continued funding. It’s common for taxing authorities like the IRS to provide tax breaks to individuals and commercial entities that make qualifying charitable donations.
Charitable lead trust A charitable lead trust is a financial arrangement that’s designed to reduce the tax burden associated with assets to be inherited. The charitable lead trust is typically set up by the owner of an estate while that owner is still living. Income from the estate is donated to charitable organizations to offset the estate’s tax liability. Once the taxes are reduced and the owner has passed, the principal can be transferred to the beneficiaries, who would face a significantly lower tax burden.
Charitable remainder trust A charitable remainder trust is a financial arrangement designed to reduce the income tax liability associated with an estate. Income from the estate is distributed to the beneficiaries for a certain period of time. At the end of that specified period, the entire estate is transferred to designated charity organizations. In doing so, the capital gains tax associated with the donated assets is eliminated.
Charter A charter is the legal documentation of a corporation’s creation and structure. In the U.S., a charter is issued or approved by the state government. The document usually defines the name, location, and primary business activity of the corporation.
Chattel Chattel is a synonym for personal property, meaning property other than real estate.
Chattel mortgage A chattel mortgage is a debt facility that’s secured by personal property. Chattel mortgages can be used to finance mobile homes, as long as the home isn’t permanently affixed to the land. The lien would pertain to the home only, but not the land.
Check A check is a negotiable draft that directs a bank to pay a certain amount of money to a specific payee. The funds to make this payment would come from the checkwriter’s deposit account that’s held with the bank.
Check clearing Check clearing is the process of moving a cash payment as directed by a check from the account where the check was drawn to the account where the check was deposited.
Check hold Check hold is the time period for which a banking institution waits before releasing funds associated with a deposited check.
Check kiting Check kiting is a means of using two deposit accounts to withdraw money illegally from the bank. The accountholder writes a check from one account, even though the account doesn’t have the necessary funds to cover the check. That check is then deposited into a second account, and a withdrawal is made before the bank realizes that the deposited check will be returned for insufficient funds.
Check representment Check representment is the process of repeatedly attempting to deposit a check that’s been returned for insufficient funds until the necessary funds appear and the check can be paid.
Check safekeeping Check safekeeping is a service that banks provide to their checking accountholders. Copies of canceled checks aren’t returned to the accountholder each month, but instead, are held by the bank. Accountholders may request copies of specific checks, if necessary.
Checking account A checking account is an arrangement with a banking institution that allows a consumer to deposit funds and then write checks to be drawn on those deposited funds. Checking accounts vary widely in their features: some charge a monthly fee, some pay interest on the deposits, some have minimum balance requirements, etc.
Checks returned with statement Checks returned with statement is an option offered with some checking accounts, whereby the bank returns all canceled checks to the accountholder, along with the monthly statement.
Cherry picking Cherry picking is the act of selectively choosing something. In investing, some investors and fund managers may choose securities that have performed well in another portfolio, rather than making the selection by way of thoroughly researching an entire category of securities. In bankruptcy, the courts might “cherry pick” the contracts that benefit the insolvent company, while eliminating the contracts that do not.
Child and dependent care credit The child and dependent care credit is a tax break offered to taxpayers who must incur childcare or dependent care expenses in order to work or seek employment.
Child tax credit A child tax credit is a tax break available to taxpayers who claim a dependent child, or children, on their tax returns.
Christmas club A Christmas Club is a deposit account designed to help accountholders save for Christmas expenses. The account may be structured to fund itself via automatic monthly transfers from a linked checking account. Typically, the Christmas Club would pay interest on the deposits, and may assess penalties if the money is withdrawn before a specific date.
Circuit breaker A circuit breaker is a mechanism that shuts off the flow of electricity to certain parts of a building for safety purposes. In investing, the term refers to procedures implemented by stock exchanges to prevent massive, panic-driven sell-offs. The most common of these is a trading halt that goes into effect when a particular index starts dropping significantly in value.
Citizenship test Citizenship test is one of the requirements that must be met for a person to qualify as a dependent on a U.S. tax return. To pass the citizenship test, the dependent must be a U.S. citizen, an adopted foreign child that has lived in the household throughout the tax year, or a resident of Mexico or Canada.
Classic card Classic card is the name that VISA uses in reference to its standard credit card.
Classified loan A classified loan is an approved debt facility that’s later identified by bank auditors as troubled or substandard.
Classified property tax Classified property tax is an assessment system that charges different rates depending on whether the property is commercial or residential.
Clawback A clawback is a decrease in value that follows an increase in value. In the stock market, a clawback occurs when a stock’s value rises, and then falls shortly thereafter. In personal finance, a clawback occurs when one receives financial benefits which must subsequently be returned because stated contigencies weren’t met.
Clean Clean means debt-free.
Clear title As the name implies it is clear and free of legal encumberances and liens vis-vis the ownership of the property
Clear title A clear title is ownership of a property that’s without claims, liens. or disputed interests. Ownership of real estate cannot be transferred or sold until outstanding claims, liens, and disputes are resolved.
Clearance sale A clearance sale happens when a retailer discounts prices in order to clear out slow-moving inventory and make room for next season’s merchandise.
Clearinghouse A clearinghouse is an agency or organization that settles transactions. In banking, a clearinghouse facilitates the exchange of checks and the corresponding settlement of account balances. In futures trading, clearinghouses are responsible for trade settlement as well as reporting trade information, collecting margin funds, and ensuring contract fulfillment. Each futures exchange has its own clearinghouse.
Clearinghouse A clearinghouse is an agency or organization that settles transactions. In banking, a clearinghouse facilitates the exchange of checks and the corresponding settlement of account balances. In futures trading, clearinghouses are responsible for trade settlement as well as reporting trade information, collecting margin funds, and ensuring contract fulfillment. Each futures exchange has its own clearinghouse.
Clearinghouse funds Clearinghouse funds are monies that are in the process of being settled by a central clearing agency. This settlement process often results in a delay between when a check is deposited into an account and when those funds are available for withdrawal.
Client-based Client-based describes banking arrangements that allows customers to access their bank records remotely, usually by way of the Internet.
CLO A CLO, or collateralized loan obligation, is a debt security that’s securitized by a pool of commercial loans. CLOs allow financial institutions to raise capital and redistribute the risk of the loans to a group of investors. Investors benefit by being able to take a percentage of ownership in attractively priced commercial loan obligations.
Close Close generally refers to the finalization of a transaction. In real estate, the close is the point in time when ownership is transferred. This transfer typically involves the settlement of mortgage funds from the lender to the borrower, and the settlement of down payment funds from the buyer to the seller. In investing, the close can be either the end of a trading period, or the price for which a stock traded in the final transaction of a given trading period.
Closed fund A closed fund is a diversified securities portfolio that’s no longer accepting monies from investors. Funds might be closed to constrain the asset base to a level where the fund’s investing strategy can still be implemented effectively. Sometimes closed funds will continue to accept additional investments from existing investors only.
Closed-account fee A closed-account fee is a charge assessed when a customer closes an account. A bank might charge a closed-account fee if a customer fails to keep a line of credit open for a specified time period. Closed-account fees should be defined in the account documentation or loan agreement.
Closed-end credit Closed-end credit describes any debt facility that must be paid back in full, with interest, by a specific date. Most closed-end credits require regular principal and interest payments over time. Mortgage loans and auto loans are closed-end, but a revolving line of credit is not.
Closed-end lease A closed-end lease is an agreement that allows one party to use a second party’s property temporarily without any obligation to purchase the property at a later date. Closed-end leases are common in auto leasing; if the lease is closed-end, the individual leasing the vehicle has the option to return the car at the end of the lease arrangement.
Closed-end management company A closed-end management company sells shares of its funds or investment portfolios in limited, fixed quantities. The company would make a specific number of shares available to the public through an initial public offering. Once those shares are sold, new investors could only invest in the fund by purchasing shares from existing investors.
Closed-end mortgage A closed-end mortgage is a real estate loan that cannot be increased after the initial funding. The traditional first mortgage is closed-end, because the borrower is not able to borrow more under the same loan.
Close-out sale A close-out sale occurs when a retailer discounts prices in order to sell off discontinued items.
Closing In some states a real estate transaction is considered ‘closed’ only when all the pertinent documents are recorded at at the local recorders office. In others, closing is a meeting between the buyer, seller and lender or their agents where all documents are signed and funds legally change hands. Closing is also called settlement and includes fees like origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The cost of closing is usually about 3 percent to 6 percent of the mortgage amount.
Closing costs These are expenses incurred over and above the price of the property, by buyers and sellers when transferring ownership of property. They are of two types, non recurring and pre paid. The former costs are incurred on items paid just once as a result of buying property or obtaining a loan. Pre-paid are costs which are recurring such as property taxes and homeowners insurance. A lender usually gives the borrower an estimate of the total costs on Good Faith within three days of receiving a home loan application. Closing costs normally include an origination fee, an attorney’s fee, taxes, an amount placed in escrow, and charges for obtaining title insurance and a survey. Closing costs percentage will vary according to the area of the country.
Closing statement This is the final statement of costs incurred on purchasing property or closing of a loan. It is also known as the HUD-1
Cloud on title The provision or conditions disclosed by a title search that unfavorably affect the title to property and cannot be removed except by court action, release or deed.
CLTV CLTV, or combined loan-to-value ratio, is a borrower’s total mortgage debt outstanding divided by the value of the mortgaged property. Total mortgage debt outstanding includes unpaid balances under first and second mortgages. CLTV is expressed as a percentage.
CLTV or Combined loan-to-value ratio A ratio which compares the person’s overall mortgage debt to the home’s fair market value. This is expressed as a percentage.
Cluster development Cluster development is a method of laying out planned developments whereby homes are grouped together in some areas so that other areas can be preserved as open space. Cluster development is intended to balance population density preferences with the desire to maintain some amount of natural, undeveloped land.
CM CM means compounding method.   It designates whether a deposit account compounds interest daily, monthly, quarterly, etc.
CMG plan A CMG plan is a non-traditional mortgage loan that acts as a debt facility and checking account combined. The borrower deposits her paycheck into the CMG account, and the debt balance is immediately reduced. As the borrower makes payments out of the account for regular expenses and spending, the debt balance is increased. The amount of income that isn’t spent each month is applied as a monthly mortgage payment. CMG plans can reduce the duration and interest costs of a mortgage significantly, but they’re only appropriate for borrowers who have strong and predictable incomes.
Co-borrower A co-borrower in any lending situation is a person who accepts responsibility for repaying the debt. This is also known as a co-signer or a co-applicant.
Co-branded cards Co-branded cards signify a relationship between a financial institution and another business, or between the financial institution and a card issuer such as American Express or VISA. Businesses such as department stores and airline companies commonly partner with a financial institution to provide a branded credit card   that rewards customers with frequent buyer points. Financial institutions partner with the credit card issuers so that cardholders can benefit from wide scale acceptance of the card.
COFI COFI, or cost of funds index, is a weighted average of interest rates paid on checking and savings accounts in Arizona, California, and Nevada. The index is published monthly, and represents the cost of deposit funds for the financial institutions in these states. COFI is used as a base rate, or benchmark, for adjustable-rate mortgages in the western U.S.
Co-housing Co-housing, also known as cooperative housing and community housing, is a type of residence where families live in separate units, but share certain facilities, such as kitchens and laundry rooms.
Coinsurance Coinsurance is an insurance arrangement whereby the insured party and the insurance provider share costs as defined by the policy documentation. Most health plans incorporate some type of coinsurance arrangement, either by requiring co-payments from the insured, or by requiring the insured to pay a percentage of costs incurred after the deductible is met.
Collateral It is the asset that acts as the guarantee in the repayment of the loan. The borrower may risk losing this asset if he is unable to repay his loan according to the terms of the loan contract or the mortgage or the trust deed.
Collateral note A collateral note is a debt or note payable that’s secured by certain assets. If the borrower defaults on the loan agreement, the lender may assume ownership of the pledged assets.
Collateral surety Collateral surety is commercial paper (a short-term investment) that’s pledged as security for a loan. If the business defaults on the loan agreement, the lender may assume ownership of the commercial paper holdings.
Collateralized mortgage obligation – CMO A collateralized mortgage obligation, or CMO, is a type of mortgage-backed security. The defining feature of a CMO is its tranche structure that minimizes prepayment risk for at least one class of investors. For example, a CMO might be issued in three tranches called Class A, B, and C. As the underlying mortgages are paid off (usually refinanced) prior to maturity, Class C investors would be paid out first, followed by Class B investors. Since Class A investors are the last to be paid, they assume the least amount of prepayment risk. The pricing of each CMO tranche or class reflects the corresponding risk level.
Collaterized loan obligation A CLO, or collateralized loan obligation, is a debt security that’s securitized by a pool of commercial loans. CLOs are commonly structured in tranches, which allows prepayment risk to be minimized for at least one class of investors. For example, a CLO might be issued in three tranches called Class A, B, and C. As the underlying loans are paid off prior to maturity, Class C investors would be paid out first, followed by Class B investors. Since Class A investors are the last to be paid, they assume the least amount of prepayment risk. The pricing of each CLO tranche or class reflects the corresponding risk level.
Collection When a borrower lags behing in his loan payment, the lender contacts him in an attempt to bring the delinquent mortgage current which then goes to ‘collection’. The efforts to file and mail the necessary documents and notices in the eventuality of a foreclosure of the property is called collection.
Collection agency A collection agency is an entity that’s in the business of collecting delinquent accounts on behalf of lenders,   businesses, or individuals.
Collection float Collection float refers to the time between when a check is deposited, and when the associated funds are available for withdrawal. In investing, collection float refers to the quantity of shares outstanding and available for public trading.
Collusion Collusion is a secret plan, devised and agreed on by two or more people, to commit fraud.
Comaker A comaker, also called a cosigner, is one who assumes full responsibility for a debt if the borrower does not or cannot repay the obligation as promised. Comakers document their acceptance of this responsibility by signing the promissory note.
Co-maker A co-maker, also called a cosigner, is one who assumes full responsibility for a debt if the borrower does not or cannot repay the obligation as promised. Comakers document their acceptance of this responsibility by signing the promissory note.
Combination loan A combination loan is an arrangement between a lender and borrower to make two separate, but related, loans. As an example, if a property owner wishes to build a home, she could negotiate a construction loan and mortgage loan simultaneously. The construction loan covers the construction costs only; once the home is built, the mortgage loan is funded and used to pay off the construction loan. Another example is the arrangement of two loans for a home purchase; one loan funds the down payment, and a second loan funds the remaining purchase price of the home.
Combined loan-to-value ratio Combined loan-to-value ratio, or CLTV, is a borrower’s total mortgage debt outstanding divided by the value of the mortgaged property. Total mortgage debt outstanding includes unpaid balances under first and second mortgages. CLTV is expressed as a percentage.
Combined loan-to-value ratio – CLTV ratio CLTV, or combined loan-to-value ratio, is a borrower’s total mortgage debt outstanding divided by the value of the mortgaged property. Total mortgage debt outstanding includes unpaid balances under first and second mortgages. CLTV is expressed as a percentage.
Commercial bank A commercial bank is an institution that provides financial services such as deposit accounts, credit cards, loans, and lines of credit. The term might be used to differentiate a traditional bank from an investment bank. It can also be used to describe a banking institution that mainly serves businesses.
Commercial credit Commercial credit is an approved debt facility that allows a business to borrow funds and repay them at a later date.
Commercial finance Commercial finance is the practice of making and servicing loans to businesses. Such loans may or may not be secured by certain business assets.
Commercial lending Commercial lending is the practice of making and servicing loans to businesses. Such loans may or may not be secured by certain business assets.
Commercial loan A commercial loan is an extension of debt provided by a financial institution to a business. The term generally implies a long-term debt, most commonly used for business start-up, expansion, or recapitalization. Other types of commercial debt available include lines of credit, revolving credit facilities, commercial mortgage loans, and commercial bridge financing.
Commercial mortgage A commercial mortgage is a loan secured by real estate that’s used for business purposes.
Commercial mortgage-backed securities – CMBS Commercial mortgage-backed securities, or CMBS, are bonds that are sold in shares to investors. These bonds are repaid by an underlying pool of commercial mortgages, which provide high rates of return and have low prepayment risk.
Commercial paper Commercial paper is a short-term, unsecured debt issued by large businesses with good credit ratings. Unlike long-term debt issues, commercial paper maturing in 270 days or less doesn’t have to be registered with the Securities and Exchange Commission. Businesses use commercial paper to provide short-term liquidity to support regular fluctuations in accounts receivable and inventory. From an investor’s perspective, commercial paper is considered relatively low risk.
Commercial property Commercial property is real estate that’s zoned for business use. Examples of commercial property include retail centers, medical facilities, and industrial complexes.
Commercial real estate Commercial real estate is property that’s zoned for business use. Examples of commercial property include retail centers, medical facilities, and industrial complexes.
Commingling Commingling is the combining of monies or financial assets from different sources into one account so that they’re no longer considered separate property. Business owners, for example, should not mix personal funds with funds owned by the business. In security trading, a brokerage must keep its securities holdings separate from its customers’ securities holdings. Commingling is usually not wise, and in some cases, it’s illegal.
Commission Commission is a fee charged by the sales professionals like brokers or agents for negotiating deals on real estate or on loan transactions. It is usually a percentage of the price of the property or loan and taken out of the charges paid by the seller or buyer in the purchase transaction.
Commitment A written agreement in which a lender agrees to lend money on certain terms over a specified period of time.
Commitment fee A commitment fee is a finance charge assessed on committed, but unborrowed, funds. A lender’s right to charge a commitment fee is specified within the loan documentation. Commitment fees ensure that the lender is compensated for keeping the approved amount of money on hand for the borrower, even if the borrower never advances any funds.
Commitment letter A commitment letter is a written statement of terms and conditions associated with an offer of credit. The lender provides the commitment lender to the debt applicant after the credit facility has been approved.
Common area A common area is any space within a residential complex that belongs to all owners collectively. A central courtyard in a condominium complex, for example, might be a designated common area.
Common area assessment A common area assessment is a fee charged to individual owners in a residential complex, which pays for maintenance of collectively owned, collectively used areas within the complex. Funds raised through the collection of a common area assessment might be used to service the swimming pool, repaint corridors, maintain landscaping, etc.
Common areas The common areas are segments of land, building and amenities owned and managed by condominium projects homeowner’s assocation, planned unit development or any such association. All unit owners who use these premises also share common expenses for their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.
Common law Common law is the body of legal cases that establishes precedent for future legal decisions. In a common law legal system, the decisions of judges can affect or confirm the accepted interpretation of law, or even establish new law.
Common-interest development A common-interest development, or CID, is a residential complex that includes both individually owned areas (or units) and collectively owned, shared areas.
Community bank A community bank is locally owned and largely supported by the deposit and lending activities of the local community.
Community property In some of the south western states, the property acquired during marriage is presumed to be jointly owned by the couple unless expressed as separate property of either spouse or other special circumstances.
Community Reinvestment Act The Community Reinvestment Act, or CRA, is federal legislation that encourages banks to provide credit in the same communities where they accept deposits. The law is intended to provide families in low- and moderate-income areas with equal access to credit. CRA was passed by Congress in 1977.
Community Reinvestment Act – CRA The Community Reinvestment Act, or CRA, is federal legislation that encourages banks to provide credit in the same communities where they accept deposits. The law is intended to provide families in low- and moderate-income areas with equal access to credit. CRA was passed by Congress in 1977.
Comparable value Comparable value is a measurement of worth based on the selling price of a similar item. In real estate, comparable value is one of the key factors to consider when setting an asking price, with similar, recently sold properties being used as the basis for comparison. In other contexts, such as retail, comparable value is more subjective and less reliable.
Comparables Comparables are recently sold properties that are similar in square footage, location and available amenities to the home for sale. These comparable properties are used in the appraisal process to help determine the fair market value of a property. This is also known as conducting a Comparative Market Analysis.
Comparables or comps Comparables, or comps, are similar items that can be used to determine something’s value. In real estate, comparables are similar, recently sold properties that are used to establish another property’s fair market value. In business finance, the term “comps” is short for comparable same-store sales, which is an indication of sales trends between two reporting periods.
Comparative market analysis Comparative market analysis is one method used by real estate agents and homeowners to determine the real market value of a property. The analysis involves reviewing recent sales prices for similar properties and making adjustments based on the property’s relative condition and amenities.
Competent Competent means capable or proficient. In the legal sense, competent describes one who’s legally qualified or able to make binding decisions.
Completion certificate A certificate of completion is required when a borrower uses a loan for home improvements or renovation and for the construction of a new home. When the construction project is finished, a certificate of completion must be signed by a qualified authority, like the architect or developer.
Compound To compound, in the financial sense, is to calculate interest on the combined balance of principal and accrued interest. Simple interest, on the other hand, is calculated on principal only. Compound interest allows for faster accumulation of earnings.
Compound interest Compound interest is calculated over the total amount owed, including interest that has accumulated. Borrowers experience compounding interest during negative amortization when the principal amount of the loan actually increases because the monthly payments are lower than the full amount of interest owed.
Compounding Compounding is the process of calculating interest on the combined balance of principal and accrued interest. The value of an investment increases at a faster rate when previously accrued interest is rolled into the investment’s interest-earning balance.
Compounding method Compounding method refers to the frequency with which accrued interest is rolled into an investment’s interest-earning balance. Deposit accounts may compound interest daily, monthly, quarterly, semi-annually, or annually. Although the difference among these methods can be minute for small dollar amounts, greater compounding frequency means a faster accumulation of earnings.
Comptroller of the Currency The Comptroller of the Currency is a president-appointed official who heads the Office of the Comptroller of the Currency (OCC). The OCC supervises national banks, as well as federal branches and agencies of foreign banks.
Condemnation In the legal sense, condemnation is government seizure of private property, either for public use, or because the property is unsafe. Property can be seized for public use under the powers of eminent domain; when this happens, the owner receives fair compensation in return.
Conditional commitment A promise by a lender to authorize a loan if the borrower meets certain requirements in the application process.
Condominium It is a type of ownership in a real estate project, wherein each unit owner has a title to a unit in the building or property. He has an undivided interest in all common areas and in some the exclusive use of certain limited common areas.\\n\\nSee further Condominium conversion
Condominium conversion When an individual changes the ownership from that of an exisitng project which is often a rental one to the condominium form of ownership.\\n\\nSee further Condominium
Condotel A condotel is a residential complex of individually owned units that are rented out as vacation properties or hotel rooms. Condotels have the amenities of a hotel, such as a registration desk and daily cleaning service. Owners have the option to earn rental income by placing their unit in the hotel program.
Conduit borrower A conduit borrower acts an intermediary for another borrower that doesn’t meet the credit qualifications of a lender. The conduit borrower takes out the loan and then relends the funds to the second borrower, usually at a profit.
Confirmation A confirmation is a formal affirmation of an agreement. In investing, completed buy and sell transactions are documented with confirmations, which specify the date of the trade and the price, fees, and settlement terms.
Conforming loan A conforming loan is a proposed debt facility that meets the lender’s standards. Such standards might specify the collateral, the borrower’s qualifications, the loan amount, and the repayment terms. Pertaining to real estate loans, conforming mortgages are those that meet federal standards. These loans are eligible for resale to Fannie Mae or Freddie Mac.
Conforming loan limit A conforming loan limit is a cap on the dollar amount of a loan. Specific to mortgages, the conforming loan limit is an amount set annually by the Office of Federal Housing Enterprise Oversight (OFHEO).   Loans made in excess of the limit are called jumbo loans, and aren’t eligible for repurchase or guarantee by Fannie Mae and Freddie Mac.
Conforming mortgage A conforming mortgage meets the requirements to be eligible for purchase or securitization by one of the government-sponsored enterprises such as Fannie Mae, Freddie Mac and Ginnie Mae. These requirements include the size of the loan, type and age. These requirements change from year to year and vary by state.
Consent judgment A consent judgment is a binding agreement between two parties of a lawsuit that’s made prior to the completion of litigation. Once a judge approves the agreement, the terms of it are legally enforceable.
Conservative investing Conservative investing describes a strategy for purchasing securities that exposes the portfolio to as little risk as possible. Conservative investing might involve the purchase of income securities, such as Treasury bonds, or money market funds. This strategy can be implemented to preserve the value of the portfolio against inflation, but will not produce significant growth.
Conservatorship Conservatorship describes the relationship between one person who’s unable to make legally binding decisions. and another person who’s been appointed to manage the first person’s affairs. The appointed person is called the conservator.
Consideration Consideration is something that has value, such as money, property, or services. The term is normally used in reference to a sales contract, where one party provides consideration in return for the item or property purchased.
Consolidated Omnibus Budget Reconciliation Act – COBRA Consolidated Omnibus Budget Reconciliation Act, or COBRA, is federal legislation giving qualified former employees the right to continue their health coverage under a former employer’s group health plan for 18 months. The term COBRA refers either to the legislation itself, or to the actual health plan (as in COBRA insurance).
Consolidation loan A consolidation loan is a debt facility that pays off and replaces several smaller debts. Debtors would consolidate their debts to lower their monthly payment burden and overall interest rate. Consolidation loans are also called debt consolidation loans.
Constant proportion portfolio insurance – CPPI Constant proportion portfolio insurance, or CPPI, is a type of security derivative that guarantees invested funds. The trader or option writer purchases a zero-coupon bond, and uses that to guarantee the invested capital. A dynamic trading strategy is then employed that allocates the investor’s funds into two asset classes: a risky asset, and a risk-free asset. The proportion in which the funds are invested is determined by applying a risk multiplier to the difference between the total value and the guaranteed value (or floor). The account is periodically rebalanced, so that (ideally) over time, the account value grows, and more money flows into the riskier asset.
Constitution by laws Constitution by laws are the rules which govern an organization, homeowners’ association, or corporation.
Construction budget A construction budget is the amount of money reserved for a building project. The construction budget can be one number representing the total amount of funds available for the project, or it can be an itemized list of smaller amounts that are available for specific aspects of the project.
Construction loan It is a short term and interim loan to pay for the construction costs of building homes. It is in the form of periodic payments by the lender to the builder as the work progresses.
Construction spending Construction spending is the amount of money used for the development of residential and commercial buildings. The U.S. Census Bureau releases monthly figures for public and private construction spending.   The data is used in part to forecast GDP growth.
Construction to permanent loan This loan pays first for the construction of a new home, then for a long-term mortgage.
Constructive receipt Constructive receipt is a tax concept that defines when a taxpayer has earned taxable income. Earnings have been constructively received as soon as they’re made available to the taxpayer. In the case of interest earned on a deposit account, the interest is constructively received when it’s deposited to the account, regardless of when, or if, the taxpayer chooses to remove those funds from the account.
Consumer bankruptcy Consumer bankruptcy is when an individual files for protection from creditors with the federal courts. The debts in question are primarily related to the purchase of consumer goods.
Consumer credit Consumer credit is debt incurred to purchase consumer goods and services. Consumer goods and services are non-investment items that depreciate in value rapidly, such as clothes, electronics, vacations, etc. The term can also be used to differentiate personal debt from business debt.
Consumer credit counseling service A counseling service that offers advice about how to work out a realistic budget and a debt repayment plan. The goal is to ensure that debts are paid back and the consumer knows how to avoid debt in the future. These services often work closely with creditors and can greatly reduce the interest rates on credit cards. Many people visit one of these agencies when they are preparing to buy a home in order to fix their credit score.
Consumer Credit Protection Act The Consumer Credit Protection Act is federal legislation that limits wage garnishments and mandates disclosure of certain terms with respect to credit offerings. The Act was passed in 1968 and is best known for containing the Truth in Lending Act (TILA), which requires creditors to provide consumers with understandable, comparable terms for credit offers.
Consumer debt Consumer debt is money borrowed for the purchase of consumer goods and services. Consumer goods and services are non-investment items that depreciate in value rapidly, such as clothes, electronics, vacations, etc. The term can also be used to differentiate personal debt from business debt.
Consumer debts Consumer debts are loans incurred for the purchase of consumer goods and services. Consumer goods and services are non-investment items that depreciate in value rapidly,such as clothes, electronics, vacations, etc. The term can also be used to differentiate personal debts from business debts.
Consumer interest Consumer interest is the cumulative finance charges assessed on personal debts.
Consumer Leasing Act The Consumer Leasing Act is federal legislation that mandates how leasing costs and terms are disclosed to consumers. The Consumer Leasing Act was put into effect with a 1976 amendment to the Truth in Lending Act (TILA).
Consumer price index The Consumer Price Index, or CPI, is a statistic that tracks the cost of living in the U.S. CPI is used as an inflationary indicator, with rapid increases indicating inflation, and rapid decreases indicating deflation.
Consumer Reporting Agency A company that obtains files and sells information to creditors when they are deciding to extend credit to an applicant. It is important for the consumer to ensure that the information obtained by the reporting agency is correct. Consumers are able to dispute incorrect information with the agency.
Contigency It is a condition or qualification or provision that must be taken care of before the contract becomes legally binding. For example, buyers while purchasing a home, will put in a contigency that the contract will not be legally binding until he acquires a satisfactory home inspection report from a qualified home inspector.
Contiguous lots Pieces of real estate or parcels that are next to each other.
Contingency A contingency is a future event that may or may not happen. In the legal sense, a contingency is something that has to happen before a contract or agreement goes into effect. Contingencies are common in real estate contracts; a homeowner who wants to buy a different home may make an offer that lists the sale of the first home as a contingency. This means that the homeowner is not bound to purchasing the second home until the first one sells.
Contingent beneficiary A contingent beneficiary is a person who’s designated to receive insurance policy proceeds if certain conditions are met. Usually the contingent beneficiary only receives the proceeds if the primary beneficiary is deceased when the proceeds are to be paid.
Contingent fee A contingent fee is an assessment incurred when a specific event happens.
Continuous compounding Continuous compounding is a method of computing interest, where the interest earned is constantly being rolled into the principal balance. Once the interest is rolled into the principal balance, it becomes part of the interest-earning balance.
Contract An agreement either written or oral, that qualifies whether a certain thing can be done or not.
Contract for deed The sale of property or real estate in which the buyer takes possession while making payments. The seller holds the title until full payment is made. This may also be called a land contract.
Contract to purchase A document showing the price of the real estate and other terms of the transfer of title, which has been approved by both the buyer and the seller. This is also known as an agreement of sale, a purchase contract or a sale contract.
Contractor The person who constructs or oversees construction of a house or a large renovation.
Contractual lien A voluntary obligation as a result of a contract, such as a mortgage or trust deed.
Contribution Contribution, or contributions, are monies deposited into a retirement account.
Contributory value Contributory value is the amount of value one aspect of a property adds to the value of the property as a whole. A newly remodeled kitchen, for example, might have a contributory value of $50,000.
Controlled growth A set of restrictions and guidelines that a developer must follow as set by local governments that oversee the amount, type and density of new construction.
Conventional loan or conventional financing Conventional loan, or conventional financing, is a mortgage loan that has a traditional, fixed-rate structure. The terms can also refer to mortgages that aren’t insured by federal agencies, like the FHA or the VA. Finally, “conventional” is also sometimes used as a synonym for “conforming,” which describes mortgages that are eligible for resale to Fannie Mae and Freddie Mac.
Conventional Mortgage This refers to a fixed-rate, 30-year mortgage that is not insured by the government (FHA, Farmers Home Administration (FmHA) or Veterans Administration). In this mortgage the interest rate will not change during the entire term of the loan.
Conversion clause A conversion clause is contractual verbiage that allows an adjustable-rate loan to be converted to a fixed-rate loan. Fees usually apply.
Conversion option A conversion option is a feature of an adjustable-rate mortgage. It allows the borrower to convert the mortgage into a fixed-rate loan under certain conditions. Not all adjustable-rate mortgages have this feature, and those that do would carry a higher interest rate. The loan documentation would specify when and how the borrower could execute the conversion.
Convertible ARM When an adjustable rate mortgage is converted to a fixed rate mortgage under certain conditions or by a borrower within a specific time.
Convertible mortgage An adjustable-rate home mortgage where the borrower has the option to change the loan terms into a fixed-rate loan at any time.
Conveyance A document that transfers title to property. It is also used to affect a transfer, such as a deed, or mortgage.
Conveyance tax A tax imposed on the transfer of real property.
Cooperating broker A real-estate broker who earns a commission from locating a buyer for a property and initiates a negotiation.
Cooperative (co-op) It is a like a multiple ownership wherein the residents of a housing project with multiple units own shares of the cooperative corporation which owns the said property. This lends each resident the righ to occupy a particular unit.
Cooperative mortgage A cooperative mortgage is a loan that the borrower uses to fund a purchase of co-op (cooperative) shares. A cooperative share is an ownership stake in a legal entity that owns one or more residential buildings.
Co-pay Co-pay is the insured’s portion of certain medical expenses, as defined by the insured’s health plan. The co-pay is usually structured as a flat fee for a certain service, such as $20 for an office visit and $10 for a prescription.
Core capital Core capital is a term defined by federal regulators that pertains to the minimum amount of wealth that a bank must have to operate. Core capital, also called Tier 1 capital, is mainly the value of the bank’s shareholders’ equity.
Corporate relocation A corporate relocation occurs when an employer transfers an employee to another facility, such that the employee must change residences. The employer generally covers the cost of the relocation.
Corrective work Corrective work, in real estate, addresses items in need of repair or maintenance. A property buyer negotiates the corrective work to be completed, and the seller must complete agreed upon items before the sale closes.
Correspondency system A correspondency system is the interface used by bank agents to originate and manage loans on the bank’s behalf. These agents are often called loan correspondents.
Correspondent bank A correspondent bank shares its services with another, usually smaller, bank. This relationship allows the smaller bank to provide a larger selection of services to its customers.
Cosign To cosign is to take equal responsibility in another person’s debt. The person who cosigns (called the cosigner) must repay the debt if the borrower defaults.
Cosigner A cosigner, or co-signer, is one who agrees to take responsibility for a debt if the borrower defaults. A loan applicant who doesn’t qualify for a loan may be able to obtain financing anyway if he can convince a family member to be a cosigner. The presence of a qualified cosigner makes the loan significantly more attractive to the lender.
Co-signer A co-signer, or cosigner, is one who agrees to take responsibility for a debt if the borrower defaults. A loan applicant who does not qualify for a loan may be able to obtain financing anyway if he can convince a family member to be a cosigner. The presence of a qualified cosigner makes the loan significantly more attractive to the lender.
Cost basis Cost basis is the original price paid for an investment or asset, including commissions and fees. The cost basis is used to calculate capital gains or losses for tax purposes.   The capital gain or loss would be the price for which the investment or asset is sold plus fees, minus the cost basis.
Cost of debt capital Cost of debt capital is the average rate of interest that a business is paying on all borrowed funds. The cost of debt capital is an important metric for determining the breakeven point on proposed capital projects, where such projects require debt financing.
Cost of Deposit Index (CODI) The Cost of Deposit Index (CODI) is one of several indexes commonly used to set the adjustment amount of an adjustable rate mortgage (ARM). CODI is calculated as a 12-month rolling average of three-month certificate of deposit, yields as reported by the Federal Reserve Board.
Cost of funds Cost of funds is the rate of interest a financial institution is charged for borrowing money. Banks and financial institutions use their cost of funds to set interest rates on money they lend to their customers.
Cost of funds index (COFI) It is one among many indexes used to calculate the changes in interest rates for some ARMs. It stands for the the weighted-average cost of savings, borrowings, and advances for some banks, savings and loans in the 11th District members of the Federal Home Loan Bank of San Francisco.
Cost of goods sold Cost of goods sold or COGS is the direct expense associated with obtaining or producing the inventory that is sold during a specific reporting period.
Cost of living adjustment – COLA Cost of living adjustment, or COLA, is a change to wages or Social Security income that corresponds to movements in the Consumer Price Index. The Consumer Price Index is a measure of inflation, and the cost of living adjustment is intended to address changes in purchasing power. Generally, cost of living adjustments are additive to wages.
Cost of savings index – COSI Cost of savings index, or COSI, is a weighted average of interest rates paid on savings accounts. Originally, COSI was based on the rates paid by subsidiaries of Golden West Financial Corporation (GDW) that operated as World Savings. The index was used as a benchmark rate for adjustable-rate mortgages (ARMs). Since World Savings merged with Wachovia, however, the original COSI is still published but no longer used for new mortgages. Wachovia publishes a similar monthly index, called the W-COSI, which is used for new ARMs.
Cost-of-funds index The cost-of-funds index is a measure of the interest rates paid on deposits held within the San Francisco Federal Home Loan Bank District. The index is used as a benchmark for adjustable-rate mortgages (ARMs).
Cost-plus contract A cost-plus contract is a type of agreement used in construction projects, where the contractor’s fee is calculated by applying a certain percentage to the total cost of labor and materials.
Coterminous Coterminous describes two things that have the same border or boundary. In lending, coterminous specifically means having the same maturity date as another loan. If a borrower takes out a second mortgage, for example, the lender may set the maturity date to be the same as the first mortgage’s maturity. Doing so would make the two debts coterminous.
Counteroffer The rejection of an initial purchase offer by submission of another offer with different terms (such as price or closing date).
Coupon Coupon, in finance, is the stated interest rate of a fixed-income security. If a bond is issued with a stated rate of 5 percent, it’s said to have a 5 percent coupon. The term is derived from the usage of tear-off coupons with paper bonds; the bondholder would have to remove and redeem the coupon to receive the periodic interest payment.
Covenant A covenant, in a general sense, is a formal agreement. In lending, covenants are promises made by the borrower to meet certain reporting requirements, achieve certain financial metrics, or refrain from performing certain actions. Covenants are clearly defined within the loan documentation.
Covenants, conditions and restrictions (CC&Rs) Covenants, conditions, and restrictions, or CC&Rs, are legally enforceable rules pertaining to the use of property. Homeowners’ associations commonly have CC&Rs, which mandate proper exterior landscaping and maintenance of the home, or restrict neighborhood homeowners from parking unsightly vehicles in their driveways. CC&Rs are generally intended to preserve the property values in the neighborhood.
Coverdell accounts Coverdell accounts are educational savings accounts that offer tax advantages. Contributions to the account are not tax deductible, but the earnings within the account accumulate tax free. Tax-free withdrawals can also be made as long as the funds are used for qualified educational expenses. There’s a cap on the annual contributions allowed.
Coverdell Education Savings Account – ESA Coverdell Education Savings Account, also known as CESA or ESA, is a tax-advantaged savings program for children under the age of 18. Families contribute to the account with post-tax dollars, but the earnings accumulate without incurring tax liability. Withdrawals are tax-free as long as the funds are used for qualified educational expenses. There’s a cap on the annual contributions allowed.
CPI The CPI, or Consumer Price Index, is a statistic that tracks the cost of living in the U.S. CPI is used as an inflationary indicator, with rapid increases indicating inflation, and rapid decreases indicating deflation.
Cramdown Cramdown is the term describing a bankruptcy court’s approval and enforcement of a reorganization plan that’s not been endorsed by all of the creditors.
Creative financing An innovative and atypical way of structuring a home loan that allows the buyer to buy afford house.
Credit When a borrower receives something of value in exchange for a promise to repay the lender at a later time in the form of an agreement or contract.
Credit agency A credit agency collects and maintains debt payment histories of individual and corporate borrowers. Lenders use this information to evaluate a prospective borrower’s creditworthiness.
Credit analysis Credit analysis is the evaluation of a prospective borrower’s debt application. The process of credit analysis is applied to individual   and corporate borrowers; the purpose is to predict how likely the borrower is to repay the debt as promised. In the case of debt securities, investors also follow the tenets of credit analysis to determine the risk involved in purchasing the security.
Credit analyst A credit analyst reviews a prospective borrower’s qualifications and capacity to handle debt. The credit analyst’s function is to evaluate the likelihood that the borrower will repay a proposed debt as promised. This evaluation process is called credit analysis.
Credit bureau A credit bureau collects and maintains debt payment histories of individual and corporate borrowers. Lenders use this information to evaluate a prospective borrower’s creditworthiness.
Credit card A credit card is a plastic payment card that’s linked to a revolving credit account. The borrower/cardholder uses the card for payment, and receives an itemized statement of transactions at the end of each reporting period. If the balance is not paid in full by the end of the grace period, interest charges are added automatically to the account.
Credit check A credit check is the review of a loan applicant’s debt payment history. Lenders perform this review to predict how the applicant will handle the proposed debt obligations.
Credit cliff Credit cliff is a slang reference to the dangers of excessive debt leverage. In business, for example, a highly leveraged company may fall out of compliance with financial covenants and suffer a resulting interest rate increase. That increase could compound the company’s financial problems, causing further covenant violations and further rate increases.
Credit default swap A credit default swap is an arrangement that transfers a lender’s risk of nonpayment to another party. The arrangement is made between a lender and a counterparty, based on a debt created between that lender and a third party. The lender makes payments to the counterparty, and in return, the counterparty agrees to guarantee the third party’s debt. If the third party defaults, the counterparty pays off the lender and assumes the debt.
Credit derivative A credit derivative is an agreement used to transfer credit risk from a lender to another party. Derivative contracts are financial assets, with the value of the asset being dependent on some outside factor. vIn the case of credit derivatives, the value is derived from the credit risk associated with the underlying debt, i.e., the risk that’s being transferred to another party.
Credit enhancement This method to reduce credit risk by requiring collateral, letters of credit, mortgage insurance, corporate guarantees, or other agreements to provide an entity with some assurance that it will be recompensed to some degree in the event of a financial loss.
Credit freeze A credit freeze is a temporary blocking of an individual’s or business’s debt payment history as maintained by a credit agency. This is usually done for security purposes. The freeze blocks all access to the specified credit report and score, in order to prohibit the opening of new credit accounts under that identity.
Credit history It is the documented and detailed statement of an individual’s   fully repaid debts. It helps the lender to ascertain the risk and creditworthiness of a potential borrower and whether   he will be able to repay future debts in time.
Credit instrument A credit instrument is a document that defines or substantiates a borrower’s obligation to repay debt.
Credit life insurance A type of life insurance that will help make payments on the loan if the consumer becomes disabled. This coverage is optional. The cost of the policy is sometimes rolled into the loan principal amount.
Credit limit A credit limit is the maximum amount of debt available to a borrower under a credit card, charge card, or other type of revolving credit facility. The borrower may apply charges to the account only up to the approved credit limit.
Credit line A credit line, or line of credit, is a debt facility that allows the borrower to take cash advances up to a predetermined amount. The term can also be used in reference to the maximum amount of credit available under a particular credit arrangement, as in, “Bob’s credit line is $20,000.”
Credit monitoring service A credit monitoring service notifies individuals of certain changes to their credit file. This service helps individuals detect any signs of credit fraud or identity theft before their credit history is damaged.
Credit rating Credit rating is a generic term for any system that ranks an individual’s or business’s ability to make debt payments as promised. In consumer credit, the most common credit rating is the FICO score, which is a numerical value lenders use to evaluate a borrower’s creditworthiness.
Credit report A documented statement of an individual’s credit history and borrower’s current credit standing. It is prepared by a credit bureau and used by lenders in determining the creditworthiness of the loan applicant.
Credit reporting agency A credit reporting agency collects information on an individual’s or business’s debt payment history. Lenders use this information to evaluate a prospective borrower’s creditworthiness.
Credit repository An organization that colates, references, updates and stores financial and public information about the payment records of individuals who are applying for loans.
Credit risk A measurement of a person’s creditworthiness. People who pay down their debts on time are considered a better risk by lenders and will be charged lower interest rates for borrowing money. The risk factor is determined by your credit history and your credit score.
Credit score A number that reflects the credit history as outlined in that person’s credit report. A lender will calculate this number using a computer system as part of the process of assigning interest rates and terms to the loans they make. The higher the number, the better the terms that a lender will offer. A good credit score is around 720. It is possible to raise your credit score over time and by appealing certain items that appear on your report. It is smart for consumers to monitor and track their credit reports to ensure that the information is correct and to make sure that the items that they have disputed do not remain on their reports.
Credit squeeze A credit squeeze is an economic condition where the availability of loans is dramatically reduced. During a credit squeeze, both individuals and corporations have difficulty obtaining affordable loans.
Credit union A credit union is a non-profit organization that provides deposit and lending services. Credit union members share ownership in the organization, and therefore, share in its profitability. Individuals usually qualify for credit union membership by their association with a certain group, such as a labor union or university alumni association. Credit unions, like banks, carry deposit insurance.
Creditor The person or company/lender who is owed money.
Creditor meeting A creditor meeting is a gathering that takes place several weeks after a bankruptcy case is filed. The bankrupt debtor and the bankruptcy trustee must attend the meeting, but creditors involved in the case have the option to participate. The creditor meeting is also called a 341 meeting, after the section of the Bankruptcy Code that describes it.
Credits Credits, in accounting, are the amounts that offset debits. Pertaining to an individual’s credit card statement, a credit is an amount that reduces the total amount due. In taxes, credits are amounts that reduce one’s total tax liability.
Creditworthiness Creditworthiness is an individual’s or business’s ability and willingness to repay debt. When an individual or business submits a loan application, the lender reviews the applicant’s qualifications, including credit history and income, and makes an evaluation regarding that applicant’s creditworthiness. This evaluation determines if, and on what terms, the loan application will be accepted.
Cross-collateralization Cross-collateralization occurs when one piece of real or personal property is used as security for two separate loans.
Crossed check A crossed check is a written draft that can’t be cashed; it can only be deposited. Crossed checks can be identified by parallel lines that run across the entire face of the check or in the top left corner. Crossed checks are not widely used in the U.S.
Crowding out Crowding out is an economic situation where interest rates are rising due to excessive government borrowing. As the government borrows more and more, market interest rates rise, eventually to the point that individuals and businesses can no longer afford to borrow.
Cul-de-sac A cul-de-sac is a street which ends in a broad circle with houses arranged around it. The street is typically a dead end street.
Cumulative interest Cumulative interest is the combined total of interest expenses associated with a loan over time.
Curable defect A minor or inexpensive problem with a property that can be remedied. Peeling or chipping paint is a curable defect, but location in a high crime area is not.
Curb appeal How a home looks from the street.
Cure period A cure period is a contractually designated timeframe during which a borrower, or party to a contract, can fix a default. If a commercial borrower violates a financial covenant, that borrower can avoid default by getting the business back into compliance before the cure period ends.
Current assets Current assets are line items on a balance sheet that represent cash and property that will be converted to cash in 12 months or less. Typical current asset accounts are inventory, accounts receivable, prepaid expenses, and short-term investments.
Current production rate The current production rate is the highest interest rate allowed on mortgage-backed securities that are guaranteed by Ginnie Mae.
Current ratio The current ratio is the quotient of current assets divided by current liabilities. Current assets include cash and property that’s expected to be converted to cash within 12 months. Current liabilities are debts that are expected to be paid off within 12 months. The ratio provides an indication of a company’s liquidity, as well as its ability to pay its short-term debts.
Current year tax Current year tax refers to taxes payable in the same year. Businesses and high-income individuals often make quarterly tax payments in the year that they are incurred rather than after the tax year ends.
Custom builder A contractor that constructs or remodels houses based on plans submitted by the client.
Custom home A house built according to plans which have been jointly designed by the owner/buyer and a hired architect.
Customer Identification File (CIF) A customer identification file, or CIF, is a digital set of information about a customer. In banking, a CIF would contain the customer’s account and credit data.
Cyberspace Cyberspace describes networks of computers, through which information is exchanged and human interaction takes place, regardless of geographical proximity. Science fiction author William Gibson coined the term in his 1984 novel Neuromancer.

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D

Date of maturity Date of maturity is the date on which final payment is due for a loan or obligation.
Dating Dating, in lending, is the practice of liberally extending credit to a borrower, beyond what would be offered in normal practice.
Day loan A day loan is a type of funding offered to brokers for the purchase of securities. Funds are advanced with the promise that the broker will deliver the purchased securities to the bank later that same day. Once the securities are received, they become collateral, and the loan is converted to a broker’s loan.
Days on the market The time between the property being listed and either the sale of the property or the property being taken off the market.
Dealer charges Pertaining to automobiles, charges for extra services, products and detailing sold by the dealer. These may include, but are not limited to, rust proofing, and extended warranties.
Dealer holdback An allowance paid by the manufacturer of the automobile to the dealer to help the dealer keep his inventory stocked. Having this allowance lets the dealer purchase the vehicle for less than the invoice price. This means that there is usually more money available to play with than the salesperson is letting you know about.
Dealer incentives These are incentives given to the dealership from the manufacturer that the dealer may pass on to the buyer. Generally, the incentives are offered to move slow selling models and to reduce inventory to make room for newer cars.
Dealer invoice The amount the dealer pays for the car and options from the manufacturer.
Dealer prep These are additional charge that dealers try to impose on buyers. This is pure profit for the dealers; keep in mind the dealers have already been paid by the manufacturer for the cost of preparing the car for sale.
Dealer sticker price A sticker including the Monroney sticker price (MSRP) plus the suggested retail price of dealer-installed options, an additional dealer profit (ADP) and dealer preparations like undercoating. This is often the highest asking price for the auto.
Dear money Dear money is an economic term describing a situation where money is in short supply. Individuals and borrowers are generally unable to secure loans at affordable rates during a dear money period.
Death tax Death tax is an informal term for estate or inheritance tax. Taxes are payable on the fair market value of the estate’s property, net of liabilities, at the time of the decedent’s death.
Debenture A debenture is an unsecured debt security, such as a Treasury bond or Treasury bill. Governments and highly-rated corporations can issue debentures to raise capital. Because there’s no collateral supporting the debenture, investors must feel confident in the creditworthiness of the issuer.
Debit balance Debit balance is an amount owed. In investing, for example, the debit balance reflects the amount of cash funding that a customer’s margin account requires for settlement of a transaction.
Debit bureau A debit bureau is an organization that tracks customers’ checking account activities. Information tracked includes check writing and overdraft history. Banks use debit bureau information to identify potentially risky customers, i.e., those that have had a history of mishandling their cash accounts.
Debit card A debit card is a plastic payment card that’s linked to a deposit account. Debit cards are accepted for purchase transactions at participating businesses. When the card is presented and approved for payment, the transaction amount is almost immediately deducted from the account balance. Debit cards can also be used at the ATM for funds withdrawals, deposits, and transfers.
Debt An obligation or money owed to someone
Debt consolidation Taking all of your multiple loans and bringing them together to form one single loan. This usually creates a lower monthly payment but extends the length of the loan. Sometimes referred to as a consolidation loan, and commonly used by student loan agencies.
Debt deflation Debt deflation occurs when the collateral supporting a loan declines in value. This scenario greatly increases risk for the lender and borrower. Consider a mortgage loan that financed 100 percent of the purchase amount: If the home declines in value, the lender’s collateral will be worth less than the amount the borrower owes. If the borrower needs to sell the property, he would have to pay cash out of his pocket to cover the difference between the selling price of the home and the amount owed on the mortgage.
Debt instrument A debt instrument is a document that defines or substantiates a borrower’s obligation to repay an obligation or balance due.
Debt retirement Debt retirement is the repayment of money owed. When a debt is completely paid off, it’s said to be retired.
Debt security A security underlining a loan given by an investor or lender to a recipient. In return for the loan, the recipient agrees to pay interest and to repay the debt by a specified date.
Debt service Debt service is the total of required principal and interest payments for a given loan over a certain time period.
Debt to available credit ratio The combined amount of money a person has in outstanding debt, compared to the amount of credit available on all of the individual’s credit cards. The higher a person’s debt to available credit ratio, the higher risk that person poses to a lender.
Debt to income ratio A percentage of pre-tax earnings that are used to pay off loans (auto loans, student loans and credit card balances). There are two ratios that lenders use to determine there decisions: The front-end ratio is the percentage of monthly before-tax earnings that are used for house payments (including principal, interest, taxes and insurance). In the back-end ratio, the borrower’s other debts are factored in.
Debtor A debtor is an individual or entity that owes money. Debtors owing money to a bank or lender are called borrowers, and debtors owing money to investors (who have purchased the debtor’s bonds or debentures), are called issuers.
Debtor-in-possession A debtor-in-possession is an individual or entity that has petitioned for bankruptcy protection, but still holds property in which creditors have a security interest. A business in Chapter 11 bankruptcy can continue to operate, using the assets that are secured by creditors to generate income. A business in this situation is a debtor-in-possession.
Debtor-in-possession financing Debtor-in-possession financing, or DIP financing, is a debt facility made to a company in Chapter 11 bankruptcy. DIP financing usually takes priority over other debts. The debt is subject to strict covenants, and the company must fulfill its ongoing reorganization obligations.
Debt-to-available-credit ratio Debt-to-available-credit ratio is the quotient of an individual’s outstanding debt obligations divided by that individual’s total amount of approved credit. If a person has only one credit account of $5000 and owes $2500 under that account, the debt-to-available-credit ratio is 50 percent. From a lender’s perspective, a higher ratio indicates greater risk.
Debt-to-income ratio Debt-to-income ratio, or DTI, is the quotient of a borrower’s minimum debt payments divided by that borrower’s gross income for the same time period. DTI is used by lenders as one factor in the evaluation of risk associated with a debt request. From the lender’s perspective, a higher ratio indicates greater risk.
Debt-to-income ratio – DTI Debt-to-income ratio, or DTI, is the quotient of a borrower’s minimum debt payments divided by that borrower’s gross income for the same time period. DTI is used by lenders as one factor in the evaluation of risk associated with a debt request. From the lender’s perspective, a higher ratio indicates greater risk.
Deceased alert A deceased alert is a security notification indicating that a person has died, and should therefore not be issued credit. The alert prevents fraudulent parties from taking out credit in the decedent’s name, or pursuing other, similar identity theft activities. Relatives of the deceased must request the issuance of a deceased alert from the credit bureaus.
Decedent A decedent is a deceased person.
Decreasing term insurance Decreasing term insurance is a life insurance policy under which the death benefit amount payable declines over time. If the insured’s death event occurs in the first month the policy is in force, the beneficiaries will receive the maximum death benefit. In each subsequent period, the death benefit will be lowered by a specified amount or percentage. Decreasing term insurance addresses circumstances where the insured has higher liabilities and lesser assets in the earliest years of the policy.
Deed A document or contract of legal bearing with evidence of title to property
Deed in lieu of foreclosure A deed in lieu of foreclosure is an exchange of outstanding (and usually past-due) mortgage debt in return for full ownership rights to the mortgaged property. A property owner in distress can sometimes avoid foreclosure by negotiating this arrangement with the lender.
Deed of release A deed of release is legal documentation that a claim on a property has been removed. Once a mortgage debt is completely satisfied, either through regular payments or refinance, a deed of release is issued to indicate that the lender no longer holds a security interest in that property.
Deed of trust In some states a deed is used instead of a mortgage to secure payment and the title is conveyed to a trustee.
Deed-in-lieu This is the title given to the lender when the borrower wants to avoid foreclosure due to default of loan. The lender retains the right to stop the foreclosure activities if the borrower asks to provide for this document. In such a case the deed-in-lieu will preclude the inclusion of documents related to the foreclosure from appearing in the credit hisotry of the borrower and being a matter of public record. However, irrespective of whether the lender accepts the deed-in-lieu or not, the non-repayment of debt will show on the credit history of the borrower.
Deeds Deeds are legal documents that confer some privilege, such as property ownership, on the holder. A deed for a vehicle, for example, gives the holder the right to possess and use that vehicle. Deeds are most commonly associated with real estate property ownership.
Default When the borrower fails to meet the promise of monthly mortgage repayment as per the legally binding contract within a specified time it is known as default.
Default premium Default premium is the extra charge that a bad credit borrower must pay for borrowed funds. Financial institutions charge higher rates when lending money to individuals and corporate debtors with poor credit histories, because these borrowers present a higher risk of default.
Default probability Default probability is a value representing the chances that a borrower will violate the terms of a loan contract. If a borrower fails to make payments as specified in the loan documentation, that borrower is said to be in default. Lenders use default probability as one factor in approving and setting terms for loan requests.
Default risk Default risk describes the likelihood that a borrower will fail to make debt repayments as promised, or fail to meet other covenants of a loan agreement. Lenders assess a borrower’s default risk when deciding whether to make a loan offer and what the terms of the offer should be.
Deferment A postponement of loan repayment, often allowed by the lender during the duration of a student’s education and for certain post-college programs such as the Peace Corps. Students may also request a deferment post graduation in times of financial hardship; this can change the terms of loan, however.
Deferred account A deferred account is a savings vehicle, such as an IRA, that postpones income tax liabilities until some future date. In regular IRAs, for example, earnings are not taxed until funds are withdrawn.
Deferred annuity A deferred annuity is a savings program that postpones income payments and income tax liability until some future date. The annuity is structured with a savings phase, during which the accountholder makes contributions, and an income phase, during which the saved funds are paid out in installments.
Deferred compensation Deferred compensation is the portion of an employee’s income that’s set aside for use at some future date. Most commonly, the deferred compensation is funneled into a retirement account or pension plan. Income tax on these funds is usually postponed until the money is accessed by the employee.
Deferred Interest A deferred interest loan is when a loan payment stays the same while the interest rate increases. A deferred interest loan will let you choose to pay only the minimum payment–a payment less than the entire interest owed for that month. The unpaid interest is then added to your loan amount to be paid at a later date.
Deferred payment Deferred payment is a form of short-term credit, where an amount due is to be paid back at some future date.
Deferred Profit Sharing Plan – DPSP A Deferred Profit Sharing Plan, or DPSP, is a profit-sharing and pension arrangement available in Canada. Qualified DPSPs are registered with the Canada Revenue Agency and sponsored by employers. The employer deposits a portion of profits into the plan, and employees are not liable for income taxes until funds are withdrawn.
Defined-benefit plan A defined-benefit plan is a type of retirement or pension arrangement. Under a defined-benefit plan, retirement payouts are calculated based on a specific formula; common factors include the employee’s length of employment, and salary history. The employer manages the funding portfolio and is responsible for keeping it adequately capitalized to support future benefit obligations.
Defined-contribution plan Defined-contribution plan is a retirement savings vehicle, where an employee voluntarily deposits a portion of her salary into the account, and is responsible for managing the investment portfolio. These include 401(k) and 403(b) plans.
Deflation Deflation is an economic condition where prices drop throughout a region or economy. Deflation, which is the opposite of inflation, can result from a tightening of the money supply.
Delinquency This is the failure to pay monthly motgage on due dates. Even if late fees are not charged, the late payment is called loan deliquent and beyond the stipulated 30 days, lenders have the right to report the late payment to credit bureaus.
Delinquent mortgage When a borrower fails to make their mortgage payments on time according to the terms of the loan.
Demand deposit A deposit that can be withdrawn at any time without advance notice. A checking account is a demand deposit account.
Demand draft A demand draft is an order that a bank transfer money from one account to another. Demand drafts, which are used in lieu of paper checks, are created by the recipient of the money using the   customer’s account number and bank routing number.
Demand loan A demand loan is a debt that’s repaid at the lender’s request, rather than on a stated maturity date.
Dependency ratio Dependency ratio is the percentage of a population that’s below age 15, or above age 64. These age groups are considered dependents because they’re either too old or too young to maintain regular employment. A high dependency ratio presents greater risk to an economy, because the burden of supporting the population is spread out over a relatively smaller number of people.
Dependent A dependent is one who relies on another person for financial support. Qualified dependents (usually children) are often claimed on the tax returns of the supporting party in exchange for a reduction in tax liability.
Dependent care credit Dependent care credit is a tax reduction available to those who incur expenses associated with the care of a child, parent, or disabled spouse.
Deposit A certain amount of money paid in advance in anticipation and assurance of receipt of a larger sum in the future. It is also termed ‘earnest money deposit’ in real estate terminology.
Depreciation A decrease in the value of property or assets. It is used in accounting to show an expense to reduce taxable income. Since it is not an actual expense, only a representation of the decreasing montary value of a asset in use, lender will add back the depreciation expense for self employed borrowers and take it as income.
Derivative A conditional instrument used by market participants which derives its value from an underlying security or notional amount. There are two types of derivatives: options/futures and swaps. The main use of derivatives is either to remove risk or task risk on depending if one were a hedger or a speculator.
Designated agency A designated agency is an arrangement where a buyer and seller in a transaction are both represented by agents within the same brokerage. Under designated agency, each agent separately represents only the interest of his client.
Destination charge A destination charge is the fee associated with delivering a vehicle from the manufacturer to the dealership. The destination charge is added to the price of the vehicle and passed on to the buyer.
Digital wallet A digital wallet is an electronic account set up by a consumer to facilitate payments for online purchases. The “wallet” allows a consumer to provide credit card and identification information to merchants without having to type it in manually.
Dimension plans A diagram which outlines the location of a building on a lot but does not have the intricate details of a blueprint.
Direct check printers Direct check printers are service providers that offer check printing at a lower cost than is available through a bank or credit union. To process an order, the customer must provide a voided check and/or deposit slip. The printer verifies the account and identification information with the bank before printing the checks.
Direct deposit Direct deposit is an electronic transfer of funds into a bank or credit union account. Direct deposit is most commonly associated with wages; in lieu of paper payroll checks, an employer automatically deposits wages into the employees’ personal accounts. The IRS also offers direct deposit of tax refunds.
Direct financing When a buyer sets up his or her own financing through an outside financial lender or institution as opposed to setting it up through the dealer.
Direct lease A direct lease is a type of financing, usually for equipment. The lessor buys the property or equipment from the manufacturer and then leases it to another party (the lessee) at a profit.
Direct Loan Refers to the William D. Ford Federal Direct Loan program. This lender provides student loans to students and parents directly through the U.S. Department of Education rather than a bank or lender.
Direct participation program – DPP A direct participation program, or DPP, is a business entity that operates as a passive investment vehicle. The entity makes investments, often in real estate, and then passes the resulting cash flows to investors.
Direct tax Direct tax describes a tax that’s paid directly to the taxing authority. For example, property taxes are paid to the tax assessor, and income taxes are paid to the IRS. Sales tax, however, is paid to a merchant first ,before being forwarded to the state. Direct tax can also refer to a tax that’s related to property ownership, as opposed to a tax that’s assessed upon the occurrence of some event.
Directors’ indemnities Directors’ indemnities are promises by a company that the members of the board of directors won’t be held liable for losses associated with the company’s actions. Such indemnities would specify how the directors are protected.
Disaster loss Disaster loss is the occurrence of damages associated with an unavoidable destructive force, such as a hurricane or forest fire. The parties who suffer disaster losses may qualify for special tax privileges.
Discharge Discharge is a synonym for release. In lending, discharge means to retire or write-off a debt.
Discharge of bankruptcy Discharge of bankruptcy is a court order that ends a bankruptcy case, and clears the bankrupt debtor from the obligation of repaying creditors.
Discharge of lien A discharge of lien is the release or elimination of a lien, usually following the repayment of debt, or satisfaction of a claim.
Disclaim To disclaim is to deny or give up a right, ownership interest, or obligation. The action of disclaiming is usually done in writing, and it may or may not be enforceable.
Disclaimer trust A disclaimer trust is a legal entity that holds assets for the purposes of passing them on to a beneficiary or beneficiaries at some future date. A surviving spouse can renounce ownership of assets and have them passed into the disclaimer trust without incurring the usual estate tax liabilities. The trust can then make regular payments to the beneficiaries.
Disclosed dual agency Disclosed dual agency is a situation where a real estate broker represents both buyer and seller in a transaction; both parties are informed of the dual representation, and are made aware of the limitations of the situation. Limitations include the inability to represent the interests of both buyer and seller at the same time.
Disclosure The release of information which is relevant to the matter at hand. A statement identifying potential defects to a property, such as the existence of lead paint or chemicals known to cause cancer. Disclosure also refers to the act of the lender informing the borrower of all of the terms of the loan at the time of signing, including interest rates and other pertinent information.
Disclosure statement A disclosure statement is any document that spells out the terms of a debt arrangement, or other type of contractual relationship. Financial institutions must provide IRA applicants with a disclosure statement that clearly states the rules of the IRA. Lenders must provide a prospective borrower with a disclosure statement prior to loan funding, so that the borrower has a written explanation of the proposed loan terms.
Discount loan A discount loan is a mortgage where the buyer has been given a reduced rate on a home loan when paying extra cash at closing. By purchasing mortgage points at closing, where each point equals one percent of your total loan amount, you can receive a discount loan.
Discount point An amount or fee a borrower pays to a lender which will help decrease the interest rate on a mortgage loan. One point is equal to one percent.
Discount rate The discount rate, in banking, is the interest rate charged to financial institutions when they borrow short-term funds directly from the Federal Reserve Bank. In finance, the discount rate is a factor in the relationship between the present and future values of cash. For example, a bond that’s purchased for $60 now, and pays $100 in one year, has a discount rate of 40 percent; in other words, the future payment of $100 can be purchased now for $60, i.e., at a discount of 40 percent.
Discrete compounding Discrete compounding is a method of calculating interest on a deposit, where accrued interest is rolled into the interest-earning balance at regular intervals. These intervals might be daily, monthly, or quarterly. Discrete compounding is an alternative to continuous compounding, where accrued interest is added to the interest-earning balance at infinitely small intervals.
Discretionary ARM A discretionary ARM is a type of mortgage loan that gives the lender the option of changing the borrower’s interest rate without limitation. Usually, the lender must only provide a certain notice to the borrower before implementing a rate change, and the rate can change in any amount. Discretionary ARMs are not offered in the U.S.
Discretionary income Discretionary income is the amount of one’s earnings that’s available for voluntary spending after covering the cost of food, shelter, clothing, taxes, and other essentials.
Dishonor To dishonor is to deny or refuse an obligation, such as failing to perform a promise made in a contract.
Disposable income Disposable income, also known as disposable personal income or DPI, is the amount of one’s income remaining after taxes have been paid. This amount represents what’s available to the individual for spending and saving. DPI is monitored as an economic indicator.
Disposition fee A fee imposed onto the lessee by some lessors at the end of a lease. The sum, spelled out in the lease, charges consumers for the privilege of giving back the vehicles they had leased from the dealer. This fee helps defray the cost for the dealer of preparing and selling the car after your lease is completed.
Distressed property A piece of property that is in poor condition. This may also apply to the owner of the property if he or she is in poor financial condition.
Distribution A distribution is a payment or allocation. The term is most commonly associated with withdrawals from retirement or other tax-advantaged savings accounts, dividend or capital gain payments made from a mutual fund to its investors, or cash or stock payments made from a company to its shareholders.
Diversification Diversification is a tenet of conservative investing. It calls for spreading out investment funds among different classes of assets, different industries, and/or different companies, in order to reduce risk.
Divestiture Divestiture is the act of selling off all or part of an investment. When a company sells off a business unit, for example, it’s said to be divesting that unit. Divestiture is also known as divestment, i.e., the opposite of investment.
Dividend A taxable distribution or payment of earnings to shareholders as declared by a company’s board of directors. In credit unions, a dividend is the money paid to members for deposits. This is similar to the interest banks pay to their customers for their deposits.
Do Not Call Registry The Do Not Call Registry is a list of telephone numbers that telemarketers are not allowed to call. The Registry is maintained by the U.S. Federal Trade Commission; numbers are registered upon request and without charge.
Doctrine of utmost good faith Doctrine of utmost good faith is the principle that both parties entering into a contract are acting honestly towards one another. In a lending transaction, for example, the applicant must honestly disclose all financial and employment information. The lender must also act in good faith, by providing the applicant with a full list of terms and conditions.
Document needs list An inventory of papers which a lender needs available to underwrite a loan. This list may include paycheck stubs, bank statements and tax returns.
Domicile Domicile is a legal term referring to the place which governs an individual, usually the person’s permanent residence. In the U.S., citizens have a state domicile, because state governments have their own laws about marriage, contracts, etc. Where the laws are different from state to state, an individual is held accountable for following the laws of his state domicile.
Domini 400 Social Index The Domini 400 Social Index is a stock market index representing the weighted average of market capitalizations for companies that have demonstrated social and environmental excellence. The index is published by KLD Research & Analytics.
Donor advised fund A donor advised fund, or DAF, is an entity that’s created to facilitate the giving of charitable donations on behalf of an individual, family, or other entity. DAFs are easier to set up and maintain than foundations, and the donor is able to retain significant control over how the funds are managed.
Dormancy fees Dormancy fees are charges assessed for the non-use of gift cards. Generally, a gift card is free from dormancy fees for a certain time period, such as one year. After that period expires, a monthly fee (the dormancy fee) is charged against the card balance until it is reduced to zero.
Double net lease A double net lease places the responsibility for property taxes and insurance on the tenant or lessee. Repair and maintenance expenses are paid by the property owner/lessor.
Down payment The initial and part cash payment towards the price of the property which is not financed by the mortgage.
Downshifting Downshifting is the voluntary lowering of one’s standard of living. Most commonly, downshifting involves the trade-off of lesser financial wealth in return for the hope of greater personal fulfillment. For example, a busy executive might give up a six-figure salary to spend more time with family.
Draw A periodic payment made to a construction contractor or subcontractor as the project progresses. A draw is part of a construction loan.
Draw period The period of time when a borrower may withdraw funds or obtain advances from the available line of credit. The time periods depend on the terms of your loan. At the end of the draw period, the borrow may renew the credit line or be required to pay the outstanding balance in full or in monthly payments.
Drip feed A drip feed is a series of small investments made over a period of time. Start-up companies can receive drip feeds from investors in lieu of lump sum capital investments. Individual investors can make drip feed investments by contributing $100 per month (for example) to their retirement plans.
Drop A drop, in investing, is the lowering of a numeric value, usually pertaining to indices, interest rates, and the prices of securities.
Dry rot A fungus who feeds on lumber causing it to crumble and rot away.
Drywall Drywall is a construction material used to finish interior walls and ceilings. It’s made of gypsum plaster wrapped in a paper coating. Drywall is sold in panels, and can be purchased at any home improvement warehouse.
Dual agency When a real estate agent or broker represents both the buyer and the seller in a transaction.
Dual apper Dual apper is a slang term for a mortgage borrower who completes mortgage loan applications with more than one lender. Borrowers do this to keep their options open and protect themselves from last-minute rate and fee changes.
Dual Income, No Kids – DINKS Dual Income, No Kids, or DINKS, describes a childless household supported by two streams of income. DINKS are significant to producers of high-end, luxury items, because they generally have large discretionary incomes.
Dual index mortgage A dual index mortgage, or DIM, is a real estate property loan that uses an interest rate index to accrue interest expense, and a wage and salary index to calculate the monthly payment. If the payment doesn’t cover the monthly accrued interest, the difference is added into the loan balance. DIMs are not available in the U.S., but they’re popular in some Latin American countries.
Dually Employed With Kids – DEWKS Dually Employed With Kids, or DEWKS, describes a household with children that’s supported by two streams of income. DEWKS are an important demographic for companies that provide products and services related to children, such as toys, clothes, learning tools, etc.
Due date The due date is the date on which a payment must be made. If the required payment isn’t made on or before the due date, it’s considered past due.
Due on sale clause An agreement in the loan contract that demands the loan be paid off when the property is sold.
DUNS number A DUNS number is an nine-digit identifier that’s assigned to businesses by Dun & Bradstreet (D&B). D&B collects and maintains information on businesses’ credit and payment history, and the DUNS number is used to locate a business’ information within D&B’s database. DUNS stands for data universal numbering system.
Duplex Two separate houses under one roof.
Durables Durables are consumer goods that aren’t consumed. Examples include furniture, consumer electronics, kitchen appliances, etc. Food is an example of a non-durable good.
Duration gap Duration gap refers to the difference between the lifespan of a company’s assets, and the lifespan of its liabilities. Analysis of duration gap is done to quantify the level of interest rate risk a company has. Duration gap is positive when assets have a longer duration than corresponding liabilities. This means that a company will benefit from falling interest rates, because the cost of liabilities will decrease faster than the value of the assets.
Dutch Tulip Bulb Market Bubble The Dutch tulip bulb market bubble occurred in the early-1600s. Tulips became a status symbol among the upper classes of Holland; strong demand drove market speculation, which sent the prices of tulips bulbs to unsustainable levels. Bulbs were traded on stock exchanges, and novice investors were selling off personal assets to participate in tulip investment. In 1637, prices dropped, and tulip bulbs were sold off in a panic. Many investors lost everything as a result.

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E

Early action Early action is an optional admission process offered by some universities and colleges. Students can apply to the school earlier and receive a more rapid response on their application. Early action applications are generally due by November 1 of the student’s senior year; the school then notifies the student of the decision before January.
Early closing cost reimbursement Some lenders waive underwriting costs when a line of credit is opened in anticipation of future profits. If the account closed early, the lender may impose those fees retroactively.
Early decision An opportunity that gives students the chance to apply to colleges and get an answer before the regular admissions deadline. In most colleges, early decision programs require that the student commit to attending the school if accepted under the early decision program.
Early occupancy This option allows the buyer to move into the property before the sale is closed.
Early termination charge In auto leasing, a charge that the lessee must pay if the car is turned in before the term of the lease is over.
Early withdrawal Early withdrawal is the removal of deposited funds prior to a maturity date, or prior to the achievement of a prescribed milestone. Early withdrawal is commonly associated with certificates of deposit (CDs), where funds are supposed to remain on deposit for a fixed time period. If the funds are withdrawn early, the depositor is assessed a penalty fee. Early withdrawal can also refer to the removal of funds from a U.S. retirement account prior to the accountholder reaching the age of 59 1/2.
Early withdrawal penalty When the depositor forfeits interest or is assessed a service charge for withdrawing funds from an investment or deposit before its maturity date.
Earned income The total sum of the money you earn. This includes any wages, salaries, tips, net earnings (if you’re self-employed) and any other income received for personal services. Investment income, such as dividends and interest, are not included as earned income.
Earned income credit Earned income credit, or EIC, is a tax credit available to low-income, working households in the U.S.
Earnest money Money given by a buyer to a seller when making a formal offer to demonstrate that the buyer is serious and committed. This may also be called a deposit.
Earnest money deposit Initial sum of money given by the buyer to the seller in order to assure the purchase transaction.
Earnings credit rate The earnings credit rate is a factor used to discount bank service charges for business deposit customers. The rate, which is often tied to the U.S. Treasury bill rate, is applied to a customer’s account balance to determine the fee reduction. Customers with large deposits therefore pay lower fees.
Earnings per share The net earnings of a company’s profitability divided by the average number of shares of its common stock. This serves as a way of expressing a corporation’s profitability.
Easement The right to use the land of another for specific purpose as distinguished from the right to possess the land.
Easy monetary policy An easy monetary policy is characterized by reductions in short-term interest rates. A central bank, such as the Fed, sets the monetary policy for a country or political entity. Monetary policies are implemented primarily through interest rate decisions.
Echeck An Echeck is an electronic draft ordering a bank to make a payment from one account to another. Echecks have the same function and purpose as paper checks.
Education Bond Program The Education Bond Program is tax legislation that allows holders of U.S. savings bonds to cash in those bonds tax-free, as long as the proceeds are used to pay for qualifying educational expenses.
Education Individual Retirement Arrangement A savings plan created so that parents could make nondeductible contributions to an account for a child under age 18. This program is a trust or custodial account for the child, who is the designated beneficiary of the account but not technically a retirement account.
Education IRA A savings plan which is set up to pay for a child’s education. They allow for tax-favored savings to help pay a child’s public or private schooling costs at any level.
Educational bond program Allows the holder of series EE and series I bonds to exclude federal income tax when the bonds are used to pay for a qualified higher educational expenses.
EEM (Energy Efficient Mortgage) An FHA program that helps homebuyers save money on utility bills by helping them to finance the cost of integrating energy efficiency features to a new or existing home as part of the home purchase. If a home owner has lower utility bills they can allocate a larger portion of their income to the cost of their home.
Effective age The estimate given by the appraiser on the physical condition of a building. The exisitng age of the building may be shorter of longer than its effective age.
Effective annual interest rate Effective annual interest rate is the percentage rate that represents one year’s yield on an investment, including the effects of compounding. When interest is compounded more often than once a year, the effective annual interest rate will be higher than the stated rate.
Effective federal funds rate The effective federal funds rate is a weighted average of interest rates charged by banks when they lend short-term funds to other banks. This rate is usually quoted daily.
E-file E-file is an IRS program that allows U.S. taxpayers to submit their returns electronically. The benefits of e-filing are expedited processing and reduced paper usage.
EFT Electronic funds transfer. The transfer of money between accounts made by the consumer using systems such as automated teller machines (ATMs), and electronic payments of bills.
EIN EIN or employer identification number, is a number assigned to businesses and other entities for tax purposes. A business would obtain an EIN by making an application with the IRS.
Electronic cash Electronic cash is money that changes hands electronically, usually by way of the Internet.
Electronic check An electronic check, or Echeck, is an electronic draft ordering a bank to make a payment from one account to another. Echecks have the same function and purpose as paper checks.
Electronic check presentment Electronic check presentment, or ECP, is a method of initiating the transfer of funds as ordered on a check. With ECP, the depositing bank sends the paying bank an electronic notification of the check details to begin processing. The actual paper check is then forwarded at a later date.
Electronic commerce Electronic commerce, also known as e-commerce, is the exchange or sale of goods and services via the Internet.
Electronic filing Electronic filing, or e-file, is an IRS program that allows U.S. taxpayers to submit their returns electronically. The benefits of e-filing are expedited processing and reduced paper usage.
Electronic funds transfer Electronic funds transfer, or EFT, is the movement of money from one account to another that’s initiated electronically, such as through an ATM.
Electronic wallet An electronic wallet is a digital account that holds credit card and other financial information. An individual or business having an electronic wallet can make Internet purchases at participating retailers without having to type in identification and credit card information manually.
Eligible accounts Eligible accounts, in lending, are accounts receivable that can be included in a corporate borrower’s collateral base. Financial institutions will often take a company’s accounts receivable as security in a debt facility. Since some accounts receivable have a higher chance of becoming uncollectible than others, the loan agreement will define eligible accounts and ineligible accounts. Eligible accounts are included in the collateral base, and ineligible accounts are not.
Emergency fund An emergency fund is a supply of money that’s being saved for unexpected circumstances. Personal finance experts recommend that households keep enough cash on hand to cover three to six months of living expenses. Most people choose to keep the money in a highly liquid account, such as a savings account.
Eminent Domain The constitutional right of a government to take over private property for public use. The most common use of this right is for public projects like roads, military installations, and public buildings. The owner of the property is typically given compensation.
Employee stock option An employee stock option is the right of an employee to purchase shares of company stock at a certain price. Employee stock options are granted to employees by the employer, usually as an incentive. Employee stock options are not traded on an exchange.
Employer assisted housing An agreement between an employer and a lender to help employees finance and buy a home.
Employer identification number Employer identification number, or EIN, is a number assigned to businesses and other entities for tax purposes. A business would obtain an EIN by making an application with the IRS.
Employer-assisted housing Employer-assisted housing is any type of program that involves a company providing for the living arrangements of its employees. Examples include employer-sponsored rental assistance, or a partnership between an employer and lender that makes home financing more affordable. The purpose of employer-assisted housing is to make it possible for employees to live close to the workplace.
Empty nesters People whose children have grown up and moved out. It is around this time that they may be in the market for a smaller house.
Encroachment A home improvement that illegally extends onto another owner’s property or impedes the neighbor’s use of that property, such as a poorly placed fence.
Encryption This is a way to prevent anyone but the intended recipient from reading the information by obscuring the information and making it unreadable without a code or special knowledge.
Encumbrance Is anything that restricts the fee simple title to property is an encumberance, It could be in the form of mortgages, leases, easements etc.
End loan The final mortgage loan to purchaser of a property, as opposed to a construction or other interim loan.
Endorsement An endorsement is a signature that authorizes the transfer of a negotiable instrument. Commonly, personal checks require the endorsement of the payee in order to be deposited or cashed. Endorsement can also refer to an insurance policy rider or amendment.
Endowment An endowment is an income-earning asset that’s been donated to a non-profit group or institution.   The income from the asset, and sometimes part of the principal, are to be used for a specific, donor-requested purpose. Most endowments are in the form of cash and securities.
Endowment loan An endowment loan is a specialized mortgage. During the life of the loan, the lender receives interest-only payments from the borrower. The principal payments are deposited into an endowment fund, where they earn interest and/or investment income. The full principal balance on the mortgage is then repaid at loan maturity.
Energy Efficient Mortgage A “green” or “energy efficient” mortgage is a type of mortgage ��that is ultimately rolled into your primary mortgage ��that allows you to borrow funds earmarked specifically for energy efficient upgrades to your current home or to a home that you plan to purchase.
Enrolled agent An enrolled agent is a certified professional who represents taxpayers in IRS disputes and interactions.
Enterprise zone An enterprise zone is a bounded area where programs are in place to stimulate economic growth. Usually, businesses operating within an enterprise zone are offered tax breaks or government-funded assistance.
Environmental impact statement This is a required evaluation, mandated by the government, of how construction will affect the environment surrounding a site.
Equal Credit Opportunity Act Equal Credit Opportunity Act is a federal regulation that forbids discrimination on the basis of certain factors in credit transactions. Lenders may not use race, color, religion, age, marital status, etc. to qualify an applicant for debt. The only factors which can be used are related to the applicant’s financial condition, such as income, credit history, and debt leverage.
Equal credit opportunity act (ECOA) A requirement by Federal Law stipulating that lenders and other creditors have to make credit available equally to all without discrimination or prejudice based on color, caste, creed, race, sex, national origin, marital status or receipt fo income from public assistance programs.
Equated Monthly Installment – EMI Equated monthly installment, or EMI, is a fixed principal and interest payment made against a debt each month, with the goal of paying off the debt over time. Usually, the borrower isn’t allowed to pay more than the EMI each month.
Equifax One of the three credit bureaus, also Experian and TransUnion.
Equitable distribution Equitable distribution is a legal term for the fair division of property during a bankruptcy or divorce. Equitable distribution is different from the community property concept, which generally calls for splitting the assets evenly between the two parties in a divorce.
Equity An individual’s financial interest in his own property. It is the difference between the fair market value and the balance of the loan or mortgage amount still outstanding.
Equity income Equity income is profit distributed to owners (i.e., equity holders). An individual investor earns equity income when one of his stock holdings pays a dividend. A company generates equity income when one of its subsidiaries is profitable. The term can also describe a type of mutual fund, where the holdings are chosen based on the ability to generate both dividend income and value growth.
Equity kicker An equity kicker is an ownership incentive, such as a warrant, that’s included in a debt arrangement. Equity kickers are added into the deal to make the debt investment more attractive.
Equity market Equity market is a synonym for stock market. The term refers to an organized system of buying and selling stocks.
Equity mortgage An equity mortgage is a real estate property loan that gives the lender a share of the proceeds when the property is sold. In essence, the lender gives the borrower a lower interest rate in exchange for an ownership share in the mortgaged property.
ERO ERO, or electronic return originator, is an IRS-authorized entity that performs e-filing of federal tax returns. Most commonly, these are professional tax preparers.
Escheat Escheat is the assumption of property ownership by the government, where the deceased left no will, and there are no known heirs.
Escrow A legal arrangement whereby money, property, deed, title etc are delivered to a third party or escrow agent to be held in trust pending the fulfillment of a contractual agreement. Once the event occurs, this deposit is returned by the escrow agent to the proper receipient.
Escrow account An account held by the lender in which the borrower puts in an amount over and above the required sum of the principal and the interest. The additional money put in is used by the lender to pay for items like property taxes and homeowner’s insurance when due.\\n\\nSee further Escrow
Escrow agent A neutral third party who is the keeper of the documents and money in a real estate transaction. When all of the conditions are met, the escrow agent releases the documentation and monies. This can also be known as an Escrow Company.
Escrow analysis The lender performs a periodic usually annual examination of all escrow accounts to ensure that amounts being collected will pay for the aniticipated expenditures like taxes, insurance etc.\\n\\nSee further Escrow
Escrow closing The final transfer of the title to the buyer after all of the conditions and paperwork have been met and completed.
Escrow company An escrow company is a neutral intermediary in a property transaction that holds funds and documents. Once the conditions of the sale are fulfilled, the escrow company transfers the withheld items to the appropriate parties to complete the transaction.
Escrow disbursements When funds put in the escrow accounts are used to pay extra expenses like mortgage insurance, hazard insurance and property taxes as and when they become due.\\n\\nSee further Escrow
Escrow payment Escrow payment is the money withheld from a mortgage payment (by the loan servicer) to cover property taxes, insurance, and related fees as they become due.
Estate Property owned by an individual. All real and personal property owned by an individual at the time of death.
Estate freeze An estate freeze is a means of fixing the value of assets for tax purposes, so that future appreciation of the assets will not incur estate taxes when they’re transferred to beneficiaries. There are various techniques used to accomplish this goal, and all of them are relatively sophisticated. Estate freeze strategies are implemented by individuals who have sizeable estates.
Estate planning Estate planning describes the cumulative actions taken to manage the transfer of property to heirs upon one’s death. An attorney often advises and implements estate planning actions, which can include: writing a will, taking proactive action to reduce estate tax liability, naming an executor of the estate, designating life insurance beneficiaries, etc.
Estate tax A tax based on the market value of property, less any liabilities, at the time of the owner’s death.
Estimated Closing Fees An estimate of the fees that must be paid on or before the closing date by the buyer and/or seller for services. Typically, the average payment is between 2 % and 5% of the loan amount. This will vary by lender, property location, and type of mortgage.
Estimated Financial Contribution The amount of college tuition the student and his or her family (if applicable) are expected to contribute to the overall cost of higher education. This number is determined by filling out the Free Application for Federal Student Aid, or FAFSA.
Estimated financial contribution – EFC Estimated financial contribution, or EFC, is an approximation of the portion of college education expenses that will not be covered by financial aid. The EFC helps the student, or student’s family, budget for their part of the educational expenses.
Estimated tax payments Estimated tax payments are quarterly tax installments paid to the IRS during the year the income taxes are incurred. Taxpayers who don’t have sufficient paycheck withholdings are often required to make estimated tax payments. Examples include self-employed individuals, and those who earn a large amount of investment income.
Eurocredit Eurocredit is a loan made in a currency other than the lender’s national currency. In the U.S., loans made in euros, yen, or pounds (or any currency other than dollars), are eurocredits.
Evaluator An evaluator is one who’s qualified to make appraisals. Often, evaluators deal with unique items, such as rare coins or antique furniture.
Evergreen loan An evergreen loan is a short term debt, usually a line of credit, that’s constantly renewed. The principal essentially remains outstanding for the long term, even though the loan is structured with a short term maturity date.
Eviction The legal removal of an occupant from real property.
Exact interest Exact interest is the method of calculating interest expense that’s based on a 365-day year. Some debts accrue interest for 360 days each year, while others accrue 365 days of interest annually. The method used for a given debt might be a point of negotiation between lender and borrower prior to funding, because it affects the actual annual interest costs of the loan. The loan documentation for a given debt would specify which method is to be used.
Examination of title An examination by a title company of public records and other documents to determine the chain of ownership of a property.
Excess wear charge The lessee must pay charges for exceeding the limits when turning in the car at the end of the lease. Most dealers will assess a normal wear and tear charge an outline it in the terms of the lease at the lease’s inception. Anything above the initial agreement will accrue this charge.
Exchange Exchange, in general, refers to a trade or sale of property. In investing, an exchange is a marketplace that facilitates the trading of financial instruments, such as stocks.
Exchange fee An exchange fee, in general, can be any assessment that results from a trade. In mutual fund investing, the mutual fund company may charge its investors an exchange fee when shares of one fund are exchanged for shares of another fund. In time share ownership, an owner might be charged an exchange fee when trading in time at the owned property for time at another property.
Excise taxes Excise taxes are government-imposed tariffs on the sale or use of non-essential goods. Tobacco and liquor often carry excise taxes. Excise taxes can also be imposed on someone who makes ineligible withdrawals from a retirement account.
Exclusion (tax) Exclusion is a U.S. tax term referring to income that’s specifically not included in the calculation of adjusted gross income.
Exclusive listing This legal agreement gives one real-estate agent the right to sell a property for a specified period. The owner retains the right to sell the property him or herself without paying the agent a commission if the property is not sold within the time allotted.
Executor An executor is one who settles a decedent’s estate by accounting for all assets, providing for payment of liabilities, and ensuring that the decedent’s wishes are carried out. Executors can be appointed by the estate owner before death or appointed by the court.
Exempt from withholding Exempt from withholding describes taxpayers who, upon meeting certain requirements, don’t need income taxes held back from their paychecks.
Exemption Exemption is an allowed reduction of taxable income, which results in a lower tax liability. Exemptions are available for various circumstances; an example is the tax break allowed for those who have dependent children living with them.
Eximbank Eximbank is a federal agency that offers various financial services to domestic exporters. In the U.S., the complete name of the agency is Export-Import Bank of the United States. The U.S. Export-Import Bank provides financing and insurance services, specifically to small business exporters.
Existing home sales Existing home sales is a report issued monthly by the U.S. National Association of Realtors containing home sales data for one month, including the number of transactions and the sale prices. The report only includes transactions related to existing residences, and doesn’t include new construction or the sale of newly built homes.
Exordium clause Exordium clause is the introductory section of a will. Exordium clauses usually contain information pertaining to the identity of the person who wrote the will, and general legal verbiage that defines the document as a valid will.
Exotic mortgage Exotic mortgage is a term used to describe any nontraditional mortgages. These mortgages allow homeowners to be able to afford high-priced homes. Buyers are sometimes allowed to defer principal or interest payments to a later date. These mortgages are historically risky for both the borrower and the lender.
Exp ratio Exp ratio, or expense ratio, pertaining to mutual funds, is the quotient of expenses divided by net assets. The resulting percentage is indicative of the cost to operate the fund each year. A higher expense ratio indicates a lower yield, because assets that are used to cover expenses are not invested, and are therefore not producing value and income gains.
Expensing Expensing is the practice of running business costs through the income statement rather than capitalizing them on the balance sheet. Tax legislation determines whether the costs to run a business are expensed or capitalized. Generally, costs associated with the purchase of items that have more than one year of useful life are capitalized, although exceptions to this rule are available for small businesses.
Experian One of the three credit bureaus along with Equifax and Transunion.
Explicit interest Explicit interest is the actual interest cost of a loan, expressed in dollars.
Export-Import Bank Export-Import Bank, or Eximbank, is a federal agency that offers various financial services to domestic exporters. In the U.S., the complete name of the agency is Export-Import Bank of the United States. The U.S. Export-Import Bank provides financing and insurance services, specifically to small business exporters.
Express account An express account is a deposit account with check-writing capabilities that offers customers reduced monthly fees in return for limited access to bank tellers. Express account customers can usually use the ATM, telephone banking, or online banking services free of charge, but they are charged to use bank tellers.
Extended IRA An extended IRA is a tax-advantaged retirement account that can be passed on to two generations of beneficiaries. If an original IRA accountholder dies while there are still assets in the account, those assets are passed on to the designated beneficiary, who’s called the first-generation beneficiary. With an extended IRA, the first-generation beneficiary can distribute the assets until his death, and pass what’s left to someone else, called the second-generation beneficiary.
Extended warranty An extended warranty is a purchased arrangement that pays for replacing or fixing an item if it breaks after the dealer’s warranty expires. Extended warranties are like insurance policies, where specific coverages can vary widely among providers. Extended warranties are sold for things like cars, consumer electronics, and appliances; they can be purchased from the manufacturer or from a third party.

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F

F (Fixed) F, or fixed, designates an interest rate as being permanent or non-adjustable. The “F” might be listed after an APR to designate a fixed-rate loan.
Factor A factor is a company that purchases or finances another company’s accounts receivable. The factor provides upfront payment at a discounted rate to the business, and then assumes responsibility for collecting the accounts. A business that wishes to convert its accounts receivable into cash more quickly would contract with a factor.
Factory outlet A factory outlet is a retail store of a manufacturer. Because the goods in the store come direct from the factory without a middleman, the prices are less expensive than they would be elsewhere.
Fair and Accurate Credit Transactions Act – FACTA The Fair and Accurate Credit Transactions Act, or FACTA, is federal legislation that defines standards for managing credit card information, and allows consumers to view their credit reports free of charge once a year. The main purpose behind FACTA is to provide greater protection against identity theft.
Fair credit billing act This federal act protects consumers’ credit rights including your rights to dispute billing errors, unauthorized charges to your account, or charges that were returned or were unsatisfactory.
Fair credit reporting act The FCR Act is enforced by federal law and is designed to promote accuracy and ensure privacy of information used in consumer reports by consumer/credit reporting agencies.
Fair debt collection practices act This federally mandated law prohibits certain methods of debt collection, such as harassment.
Fair housing act A federal law that prohibits discrimination by direct providers of housing such as landlords and real estate companies, as well as banks or lenders and homeowner’s insurance companies on the basis of race, color, religion, sex, national origin, family status and disability.
Fair market value It is the price that property would sell for in the open market. It is the price agreed upon by a willing buyer and a willing seller.\\n\\nSee further Appraisal
Family Limited Partnership – FLP A family limited partnership, or FLP, is an entity that’s set up to consolidate a family’s assets. Family members own the shares of the FLP rather than the assets themselves. Since shares of the FLP can be transferred among members of the family, FLPs are usually set up to reduce the estate tax liability associated with the family’s assets.
Fannie Mae (FNMA) It is a congressionaly chartered shareholder owned company and the nation’s highest supplier of home mortgage funds.\\n\\nSee further Fannie Mae’s community home buyer’s program
Fannie Mae’s community home buyer’s program A income based community lending program that provides financial products and services making it possible for low, moderate and middle-income based familires to afford homes of their own. Borrowers who participate in this program need to train in pre-purchase home-buyer education sessions.\\n\\nAlso see: Fannie Mae (FNMA)
FAQ FAQ, pronounced “fac,” is an acronym for frequently asked questions. Websites and product ownership manuals often have FAQs, which list common questions and their answers. A FAQ for a brokerage firm might include questions like, “How do I open an account?” and “How much do trades cost?”
Farm service agency The Farm Service Agency, or FSA, runs various programs that support U.S. farmers and ranchers, including loan guarantees and pricing programs. The FSA is a division of the U.S. Department of Agriculture (USDA).
FDIC (Federal Deposit Insurance Corp.) An agency of the U.S. government that manages the bank insurance funds. This agency insures deposits at banks and other qualifying financial institutions up to $100,000 per account in interest and principal. This insurance is mandatory for all nationally chartered banks and all banks that are members of the Federal Reserve System.
Fed Fed is short for the Federal Reserve, which is the U.S. central banking system. The Fed is responsible for setting and implementing monetary policy, and regulating its member banks. One of the Fed’s most visible functions is the maintenance of the federal funds rate, which drives interest rates on many short-term loan programs.
Federal Advisory Council The Federal Advisory Council is a group consisting of one elected member from each of the 12 districts within the Federal Reserve banking system. The Federal Advisory Council meets with the Federal Reserve Board of Governors periodically to discuss the banking environment and business issues.
Federal covered advisor A federal covered advisor is an investment advisor who manages more than $25 million on behalf of others. Federal covered advisors must register with the state and with the SEC, pursuant to Section 203 of the Federal Investment Advisers Act of 1940.
Federal discount rate The federal discount rate is the interest rate charged to member banks when they borrow money from the Federal Reserve Bank. The federal discount rate is managed by the Fed, but it doesn’t have a direct affect on the cost of short-term loan rates.
Federal Family Education Loan (FFEL) Federal Family Education Loan (FFEL) is a group of student financing programs that include Stafford loans, unsubsidized Stafford loans, PLUS loans (made to parents), and student consolidation loans. FFEL loans are federally guaranteed, insured loans that are made by private banks and credit unions.
Federal Family Education Loans These student loans are similar to the Direct Loan program. This group of loans includes Stafford loans and PLUS loans. They are funded primarily by banks and credit unions.
Federal funds rate The federal funds rate is the interest rate applied to loans made between member banks within the U.S. Federal Reserve system. Usually, these interbank arrangements are overnight loans, made to meet the Fed’s cash reserve requirements. Because the federal funds rate affects pricing on short-term loans made to consumers and businesses, the Fed changes it periodically to stimulate or reign in the economy.
Federal Home Loan Bank System – FHLB The Federal Home Loan Bank System, or FHLB, is a federally chartered organization that was originally established to supply reserve funds to U.S. savings and loans institutions. Today, the FHLB is also involved in housing and community development programs.
Federal Home Loan Mortgage Corporation Federal Home Loan Mortgage Corporation, or FHLMC, was the original name of Freddie Mac. Freddie Mac is a federally chartered corporation that supports the mortgage industry by repackaging qualified mortgage loans. The mortgages are purchased from lenders, securitized, and then sold to the investment community. These securities are not federally guaranteed.
Federal Housing Administration The Federal Housing Administration, or FHA, is an agency of the Department of Housing and Urban Development (HUD). The FHA insures qualified mortgages so that borrowers of limited means can have access to affordable mortgage loans.
Federal housing administration (FHA) This is an agency of the U. S. Department of Housing and Urban Development (HUD). It guarantees private home mortgages or FHA loans and provides funds to promote housing construction and underwriting. It does not itself lend money or involve itself in construction.\\n\\nSee further FHA mortgage
Federal income tax Federal income tax is the federal government’s primary source of revenue. The tax is imposed by the Internal Revenue Service (IRS), and is paid by individuals, businesses, and other legal entities, based on their annual earnings.
Federal Insurance Contributions Act Federal Insurance Contributions Act, or FICA, is legislation that mandates the withholding of a percentage of one’s income to support the federal Social Security and Medicare programs. Amounts withheld from employee wages must be matched by employers; those who are self-employed must pay both the employee and employer portions.
Federal methodology – FM Federal methodology, or FM, is a legally-defined formula that the federal government uses to calculate a student’s estimated financial contribution (EFC). The EFC is an approximation of the portion of college education expenses that will not be covered by financial aid.
Federal National Mortgage Association Federal National Mortgage Association, or FNMA, is another name for Fannie Mae. Fannie Mae is a shareholder-owned, federally chartered corporation that purchases mortgages, repackages them into mortgage-backed securities, and then sells those securities to investors. Fannie Mae (not the U.S. government) guarantees principal and interest payments on the securities, no matter what happens with the underlying mortgages. This activity provides funds for the mortgage industry so that more people in the U.S. can buy homes.
Federal Open Market Committee The Federal Open Market Committee, or FOMC, is the 12-person group that sets monetary policies for the Federal Reserve System. The FOMC assesses the state of the economy to determine the appropriate actions necessary.   These actions might include increasing or decreasing key interest rates, or conducting open market transactions of government securities to increase or decrease the money supply.
Federal poverty level – FPL Federal poverty level, or FPL, is an estimation of the minimum income needed to support a family’s basic needs such as food, clothing, shelter, and transportation. The value is used to determine a household’s eligibility for certain types of public assistance. The Department of Health and Human Services determines the FPL and the numbers, which are based on family size, are issued annually.
Federal Reserve Board This board runs the Federal Reserve System which controls the monetary policies of the US (interest rates and credit) and monitors the economic health of the country. The Federal Reserve Board was created to provide the country with a stable, yet flexible financial system. It consists of seven governors, appointed by the president for a 14 year term.
Federal Reserve System The Federal Reserve System, also known as the Fed, is the U.S. central banking system. The Fed is responsible for setting and implementing monetary policy, and regulating its member banks. One of the Fed’s most visible functions is the maintenance of the federal funds rate, which drives interest rates on many short-term loan programs.
Federal savings and loan association A federal savings and loan association is a registered financial institution that offers savings deposit accounts and mortgage loans to its customers.
Federal tax brackets Federal tax brackets are defined levels of income that correspond to the percentage of federal income tax imposed on that income level. For example, in the 2007 tax year, the lowest tax bracket is defined as income between $0 and $7,825, which is assessed 10 percent income tax; the highest bracket is income in excess of $349,700, which is assessed 35 percent income tax.
Federal Trade Commission Federal Trade Commission, or FTC, is a U.S. federal agency that’s tasked with protecting consumers from unfair and anti-competitive business practices. The FTC reviews mergers, investigates reports of fraud and false advertising, and manages the Do Not Call Registry.
Federal Truth in Lending Form This form is a document that the lender is required to provide before closing. This is the main disclosure document which outlines the key terms of the mortgage, all of the borrowing costs and the fees that are involved. This document was designed to protect consumers and provide a concise manner of calculating and presenting the terms of mortgages so that consumers can compare interest rates to find the best deal.
Federal Unemployment Tax Act Federal Unemployment Tax Act, or FUTA, is the legislation that requires employers to contribute to unemployment compensation programs.   Amounts paid are based on each employee’s wages. The tax itself is usually called the FUTA tax.
Fee simple The highest possible interest or complete ownership interest that a person can have in real estate.
Fee simple defeasible A situation where someone has outright ownership of real estate, free of any liens or other claims against title, but whose use of the property has restrictions.
Fee-based investment Fee-based investment refers to a type of investment account. The fees owed to the investment advisor are calculated as a percentage of the customer’s assets. This type of account provides greater incentive to the investment advisor to grow his client’s asset value. The alternative to a fee-based investment is the commission-based investment, where the advisor earns a set fee on each trade.
FHA mortgage A mortgage insured by the Federal Housing Administration and commonly referred to as a government loan.
FICA The Federal Insurance Contributions Act consists of payments to the Social Security retirement supplement system and the Medicare hospital insurance program. A tax for each component is levied on employers, employees and certain self-employed individuals. These taxes are taken out of your paycheck separately from your income taxes.
FICO The most commonly used credit score. The name comes from the Fair Isaac Corporation, which developed the scoring model. They are used to predict the likelihood that a person will pay his or her debts. The scores use only information from credit reports.
FICO score FICO score is a numeric value calculated by Fair Isaac Credit Organization that represents creditworthiness. When lenders talk about credit score, they’re usually referring to the FICO. FICO is calculated by a secret algorithm that considers an individual’s payment history, debt level, and other related factors.
Fiduciary A relationship where a person places confidence and trust in another with regards to a particular transaction or one’s general business affairs. The relationship is not necessarily legally established, as in a declaration, of trust but may be one of moral or personal responsibility.
Fiduciary duty Fiduciary duty is the legal responsibility to act wisely, honestly, and in good faith when representing another person in a financial transaction.
Fiduciary risk Fiduciary risk is the danger of financial losses resulting from deceptive or uninformed actions of an agent. Fiduciary risk can range from intentional fraud, to poor execution of an investment strategy that results in less-than-optimal growth of the client’s portfolio.
Field changes Any onsite modifications made to a building.
Filing extension A filing extension is a postponement of the due date for submitting tax returns. When a filing extension is requested, the taxpayer must submit any estimated taxes due, with the understanding that the supporting tax return documents will be forwarded at a later date.
Filing Fee An amount charged by public officials in your area for recording and filing your mortgage and related documents.
Filing status Filing status is a category designation that’s important in determining tax liability. There are five filing statuses: single individual, married person filing jointly, married person filing separately, head of household, and qualifying widow or widower.
Filled land An area where ground level has been raised by adding soil or other fill material.
Finance charge Finance charge is the fee assessed each billing period for the use of a credit card or credit account. The finance charge includes interest, account fees, late fees, and other transaction costs.
Finance company A finance company provides credit to individual and corporate customers. Finance companies, unlike traditional banks, do not offer deposit accounts.
Financial aid administrator – FAA A financial aid administrator, or FAA, is one who counsels and supports students regarding financial aid. The FAA might help the student apply, inform the student of programs available, and help manage the student’s funding once a financial aid package is approved. FAAs work for educational institutions.
Financial asset A financial asset is either cash or another instrument, whose value arises from a contractual claim. A stock certificate’s value, for example, is not derived from the paper itself; the stock has value because it represents an ownership claim in a company. Examples of financial assets include stocks, stock options, bonds, cash deposits, etc.
Financial institution A financial institution is a business that provides deposit services, investment services, loan services, and/or other related services. Financial institutions include banks, leasing companies, lenders, brokerages, etc. These entities may serve consumers, other businesses, or both.
Financial leverage Financial leverage is the use of debt to increase returns, such as when a business borrows money to expand its operations. Leverage can allow a company to grow without draining its cash resources, but the practice is not without risk. Debt increases interest expense and potentially places cash flow demands on the company when principal payments come due. Financial leverage can also refer to the level of debt a company has, relative to equity.
Financial modeling Financial modeling is a method of analyzing a company’s financial performance and predicting outcomes based on past performance and current industry conditions. The analyst would construct a working representation of the company’s financial statements.   This can be done in a spreadsheet, or in a more specialized software program. The analyst then uses the model to change certain inputs, and test the sensitivity of the company’s financial performance.
Financial plan A financial plan is generally the same thing as a budget. Households can use financial plans to get out of debt, or to determine when they can afford to buy a house, etc. Businesses can use financial plans to set financial performance targets for a particular period. These targets might apply to a division, product line, or the whole company.
Financial planner A financial planner is a qualified professional who helps individuals and businesses set financial targets and take the appropriate steps to meet those targets. For example, individuals would seek the services of a financial planner when starting an investment program or when planning for retirement.
Financial risk Financial risk, in general, can be any threat associated with money. In business, financial risk usually refers to the portion of a company’s risk profile that’s related to the use of debt. Debt provides capital, but it also increases interest expense, and can drain cash reserves when principal payments come due.
Financing Financing is supplying funds for a purchase or for ongoing activities. Financing often involves the use of debt, but it can also include the raising of equity capital.
Finder’s fee A sum paid to an individual for producing a buyer or seller.
Firm commitment When a lender promises to give the borrower a loan on a certain property. Also, a promise by the FHA to insure a mortgage loan for a specified borrower and property.
Firm commitment lending Firm commitment lending is the practice of providing a prospective borrower with a loan approval that remains in effect for a given time period. If the prospective borrower accepts the loan within that time period and meets the stated conditions, the lender must fund the loan.
First dollar coverage First dollar coverage is a type of insurance policy where the insurance covers the entire loss, without subjecting the customer to a deductible or copayment, up to stated policy limits.
First in, first out – FIFO First in, first out, or FIFO, is a method for determining the costs of sold inventory. Under FIFO, the first items purchased are the first items sold. In other words, the costs associated with the oldest inventory will always be moved to cost of goods sold first as sales are made. In periods where costs are rising or falling, the method of inventory accounting affects the costs of goods sold and value of inventory on the balance sheet. During inflationary periods, FIFO leads to a lower cost of goods sold and a higher inventory value.
First lien The primary claim by the lender for satisfaction of outstanding debt. The first lien is created from a first mortgage.
First mortgage It is that mortgage which receives the primary position amongst all loans taken out against a property. In case of the borrower defaulting, it is claimed first.\\n\\nSee further Second mortgage
First-time homebuyer A first-time homebuyer, in general, is someone who hasn’t owned a home previously. Other definitions apply for specific financial actions, such as early withdrawal from an IRA without penalty for the purchase of a home. In this case, a first-time homebuyer is one who hasn’t owned a home for two years prior to the purchase of the new home.
Five-year Treasury constant maturity Five-year Treasury constant maturity is an index that’s used as a benchmark for adjustable-rate loans. The index reflects the average five-year yield equivalent on Treasury securities with varying maturities.
Fixed installment A fixed installment is a regular principal and interest payment, made in the same amount in each billing period, on a loan.
Fixed rate mortgage Mortgage that has a fixed rate of interest till the end of the term of the loan.
Fixed-income security Fixed-income security is an investment that pays a stated yield or makes regular, periodic payments over time. Bonds (either corporate or government) are a common fixed-income security.
Fixed-period ARM A fixed-period ARM is a type of mortgage loan that starts with a fixed rate of interest, and then later converts to an adjustable-rate mortgage.   The initial fixed period can vary from one to 10 years. Fixed-period ARMs are also called hybrid ARMs.
Fixed-rate Fixed-rate describes a loan where the interest rate remains the same for the duration of the facility. Fixed-rate loans are considered more conservative (for borrowers) than adjustable-rate loans, where the rate changes according to economic conditions.
Fixed-rate mortgage A fixed-rate mortgage, or FRM, is a loan secured by real estate property that accrues interest at the same rate throughout the life of the debt.
Fixed-rate option A fixed-rate option is a feature included in some adjustable-rate home equity loans or lines of credit. The option allows the borrower to convert some or all of the outstanding debt to a fixed-rate loan. This option is only available under certain conditions, and these would be specified in the loan agreement. Debt having this option would be priced higher than the same debt facility that doesn’t have the fixed-rate option.
Fixed-time Fixed-time is an option for timeshare ownership describing the right to use the property during a specified week of the year.
Fixed-unit Fixed-unit is a timeshare ownership option describing the right to use the same unit within a resort for the allotted number of weeks per year.
Fixed-week Fixed-week is an option for timeshare ownership describing the right to use the property during a specified week of the year. Usually the weeks of the year are numbered, 1 through 52.
Fixer-upper A house or property that requires a lot of repair or updating. First time home buyers often save money on a fixer upper but can regain their investment when the house sells for much more than the purchase price.
Fixture Personal property that becomes real property when it is attached to a building. These properties may include ceiling fans, chandeliers, built-in bookcases, and drapery rods. May be classified as amenities.
Flat benefit formula The flat benefit formula is a means of determining how much an employer contributes to an employee’s defined benefit plan, based on the amount of time the employee has worked for the employer.
Flat fee A fixed charge that a broker may request in lieu of a commission.
Flexible fund A flexible fund is a mutual fund that has no specific investment focus other than maximizing return. Most mutual funds operate under a stated strategy, such as focusing on a particular industry or company size. Flexible funds reserve the right to make any type of investment in order to produce the best results for their investors.
Flexible Payment A type of mortgage with a flexible payment is an interest only home loan. In this arrangement, the borrower is only required to pay the interest each month; any additional payment toward the principal balance is up to the borrower. Borrowers chose this type of mortgage to free up monthly expense to allow budget allowances for retirement, home improvements, or education.
Flexible payment ARM A flexible payment ARM, also known as an option ARM, is an adjustable-rate mortgage that gives the borrower a choice of payment levels each month. These levels might range from a minimum payment that is less than the month’s interest, up to a 30-year, fully amortizing payment. If the borrower chooses to make the minimum payment, the unpaid interest is added into the loan balance and begins accruing interest in the next month.
Flexible spending account A flexible spending account, or FSA, is a tax-advantaged deposit account offered by employers to their employees. Employees are allowed to contribute a certain amount of pre-tax wages to the account, which is then used to pay for qualified expenses (such as dependent care or medical expenses).
Flexible spending account – FSA A flexible spending account, or FSA, is a tax-advantaged deposit account offered by employers to their employees. Employees are allowed to contribute a certain amount of pre-tax wages to the account, which is then used to pay for qualified expenses (such as dependent care or medical expenses).
Flipping Flipping is the practice of buying real estate properties and then selling them at a profit. Generally, flipping involves making improvements to the property to generate the necessary value increase, but some investors might choose to hold the property and wait for it to appreciate naturally before selling.
Float The amount of time the bank takes to clear or reject a check for payment.
Float period The time between when you accept a loan and when you lock-in your rate. During this time the interest rate and points on your loan will fluctuate with the market.
Floating Floating, in general usage, means variable or not fixed. In lending, floating (as in floating rate) is sometimes used to describe a loan that has an adjustable interest rate. In timeshare ownership, floating describes ownership rights that aren’t limited to a designated week or weeks of the year; the owner has the right to use the property for the specified length of time, but the exact dates of usage aren’t defined.
Floating debt Floating debt is short-term borrowing that’s continuously renewed. This is an alternative to long-term financing that a company might use if it expects market interest rates to move down over time. If rates do go down, the company has the ability to lower its interest costs. The risk is that rates will go up instead, forcing the company to take the higher market rates.
Floating lien A floating lien is a legal claim that applies to a group of assets, rather than a specific asset. Floating liens are used when the composition of the collateral is expected to change through the course of regular activities. An example would be a lien against a company’s accounts receivable, which change daily as customers are invoiced and payments are received.
Floating rate Floating rate is used synonymously with adjustable rate; both terms describe an interest rate that may vary over the life of a debt.
Floating time Floating time describes a type of timeshare ownership where the owner can exercise the use rights at any time throughout the year, as long as it’s available. The alternative is fixed-time ownership, where the owner is limited to using the property during specific dates.
Flood certification fee This fee is required by the federal law in order to obtain flood certification insurance if your property lies in a flood zone. This fee is included in the closing costs.
Flood insurance Insurance coverage for damage to physical property due to floods. It is necessary for properties located in federally termed flood areas.
Flood plain A flood plain is low-lying land that’s known to become submerged in water occasionally due to inclement weather and/or overflow of a nearby body of water.
Floor A floor, in general usage, is the lower surface in a structure. In finance, a floor is the lowest possible value for a certain transaction. Adjustable-rate loans, for example, often have an interest rate floor, which is the minimum interest rate charged on the debt, regardless of what happens to the underlying index.
Floor loan A floor loan is a type of debt most commonly associated with construction projects. The lender states a minimum amount that it’s willing to lend upfront, with later funding provided as the project meets certain milestones.
Floor models A floor model, also called a display model, is an item that’s taken out of its packaging and placed on display in a retail establishment. Once the display is changed out, the retailer will sell the item, usually at a discounted price. Floor models often suffer wear and tear while on display.
Florida room Florida room is another term for a sun room. Florida rooms are enclosed, glass structures that are attached to the outside of a home. They function as a patio would, but offer protection from the weather.
FNMA 30-year mortgage commitment delivery 60 days FNMA 30-year mortgage commitment delivery 60 days is a measure that specifies Fannie Mae’s required net yield on 30-year, fixed-rate mortgage loans that will be delivered within 30 to 60 days. Lenders use the measure to set their interest rates on conforming loans (i.e., loans they intend to sell to Fannie Mae).
For sale by owner (FSBO) For sale by owner, or FSBO, describes a property that’s being sold without agency representation. The selling owner takes responsibility for executing the documentation.
Forbearance The ability to make interest-only payments on your student loan during a time of financial hardship. If you’re having serious financial difficulty and you don’t qualify for a loan deferment, you can request forbearance.
Forced liquidation Forced liquidation is the selling of investment positions implemented by a brokerage when a customer’s account doesn’t meet margin requirements. Usually, the customer will be warned repeatedly to fund the account. If the warnings are ignored, the brokerage can sell off the customer’s investments to minimize its risk.
Foreclosure It is a reposession of property by a legal process due to default on terms of mortgage by the borrower. This property is sold at a public auction, the proceeds of which are used to settle mortgage debt.
Foreign currency surcharge Foreign currency surcharge is a fee assessed by a credit card company when the customer uses the account to make a purchase in a foreign currency.
Foreign plan A foreign plan is a Canadian pension arrangement that has complex tax consequences for Canadian taxpayers.
Foreign tax credit or deduction A foreign tax credit or deduction is a reduction of U.S. tax liability resulting from the payment of foreign taxes on income earned overseas.
Forfeiture Forfeiture is a penalty that results in the loss of an asset, such as when a homeowner who doesn’t make the required mortgage payments is forced to give up ownership of the mortgaged property.
Freddie Mac A government-created company that guarantees residential mortgages to help make them more affordable for families. Along with its sibling, Fannie Mae, the company purchases residential mortgages and bundles them into mortgage securities that are sold to investors; thus providing lenders with fresh funds for additional mortgages.
Free Application for Federal Student Aid (FAFSA) This form must be filled out to qualify for federal and state financial aid for higher education student loans.
Freeloader A term for a credit card holder who pays off the balance monthly and therefore pays no interest or fees.
Front end ratio The percentage of before-tax income that goes toward monthly house payments. This is a key ratio that lenders use when deciding whether to approve a mortgage application.
Full income verification Fully documented proof of income in order to be approved for a loan. Loans of this type usually offer lower interest rates than no-income or “no-doc” verification loans.
Full market value With reference to property taxes, this usually refers to the tax rate applied to 100 percent of the property’s value. Also full cash value.
Fully amortized adjustable-rate mortgage A home loan whose interest rate can change, and whose amount is fully paid at the end of the term.

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Garnishment An amount withheld from your pay before you see you see the money and remitted to another party, such as a creditor.
General Contractor The person or company that is hired to perform work on a construction project, who hires subcontractors, and suppliers.
GFE (Good Faith Estimate) An estimate of all closing fees including all escrow items as well as lender charges. The lender has three days to give this to the borrower after the submission of a loan application.
Ginnie Mae Formally known as Government National Mortgage Association. In the US, part of the federal Department of Housing and Urban Development that guarantees securities backed by mortgages that are insured or guaranteed by other government agencies.
Global debt facility A debt issuance facility through which U.S. dollar and foreign currency debt securities may be offered to investors worldwide with the feature of clearing and settlement through a variety of clearing systems.
Government national mortgage association (GNMA) Owned by the governemnt it is a corporation under the U.S. Department of Housing and Urban Development (HUD). A congressional chartered company, it provides funds to lenders for purchasing homes. Just like Fannie Mae only it provides funds for government loans like VA and FHA.\\n\\nSee further FHA mortgage, Veterans administration (VA)
Grace period A mortgage grace period is the time during which a loan payment may be made after its due date without incurring a late penalty.
Graduate payment mortgage A home loan where the payments start out smaller and gradually increase over the first few years, after that time it remains fixed.
Grants Financial Aid which doesn’t have to be repaid. Includes Pell grants, SEOG and merit based grants.
Green Mortgage A “green” or “energy efficient” mortgage is a type of mortgage ��that is ultimately rolled into your primary mortgage ��that allows you to borrow funds earmarked specifically for energy efficient upgrades to your current home or to a home that you plan to purchase.
Gross dividends The total amount of dividends you received in the forms of: ordinary dividends, capital gains distributions and nontaxable distributions you received during the tax year.
Gross income The total sum of all the money, goods and property you receive during the year before you reduce it with deductions or exemptions.
Ground rent A sum the leaseholder pays for the use if the land only.
Growing equity mortgage A fixed-rate home loan where payments are increased over a specified period.
Guaranteed mortgage A home mortgage guaranteed by the government or third party.
Guaranty A promise by one party to pay a debt contracted by another if the original party fails to pay or perform according to a contract.

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Half bath A bathroom that contains a toilet and a sink.
Hard inquiry An indication on a person’s credit report that someone has asked for a copy of the individual’s report. Hard inquiries happen as a result from a person applying for credit, such as a mortgage, a car loan, a credit card or a rental application.
Hazard insurance An insuarance cover against natural and other hazards like fire, storm, vandalism, etc to physical property
HELOC acronym for Home Equity Line of Credit
High-LTV equity loan A home equity loan that creates a total loan-to-value ratio of up to 125 percent or more.
Historic structure A building listed in the National Register of Historic Places and certified as historic by the U.S. Secretary of the Interior.
Home appraisal A written analysis of the estimated value of your property. A professional appraiser who has training and insight into the marketplace prepares the appraisal report. This report helps determine your home’s fair market value based on recent sales in your neighborhood.
Home appreciation A term which describes the increase in market value of real estate, or the increase in value of your house or property.
Home equity The part of a home’s value that the mortgage borrower owns outright; the difference between the fair market value of the home and the principal balances of all mortgage loans.
Home equity conversion mortgage Sometimes called a reverse mortgage, a mortgage which enables older homeowners to convert the equity in their homes into cash.
Home equity debt Debt secured by your home. Home equity interest usually is deductible as an itemized deduction.
Home equity line of credit A variation of a home loan, paid as revolving debt that is backed by the portion of the home’s value that the borrower owns outright. Interest paid on a home equity line of credit can be used as a deductible. This credit allows the homeowner to write checks against the equity on an ongoing basis to pay for multiple expenses rather than one big sum.
Home equity loan A loan based on the amount of equity a homeowner has in the property.
Home inspection A thorough examination of the house’s visible structural parts and mechanical systems made before purchase.
Home ownership and equity protection act A federal law made to discourage predatory and unfair lending in mortgages and home equity loans.
Home warranty A policy that guarantees workmanship on construction of a home and the operations of some appliances, and covers repairs for a limited time period.
Homeowner’s insurance A policy that includes hazard coverage, loss or damage to property, as well as coverage for personal liability and theft.
Homestead The place where one puts their home and is protected by law against forced sale to meet debt.
Household income The total income of all members of a household. An important calculation when applying for a joint credit situation.
Housing discrimination illegal practice of discriminating against buyers or renters of dwellings on the basis of race, color, religion, national origin, sex, family status or disability.
Housing expense ratio (or front end ratio) The percentage of before-tax income that goes toward a monthly house payment. The rule of thumb is that it shouldn’t exceed 28.
HUD Housing and Urban Development. The U.S. government agency established to govern federal housing and community development programs. HUD oversees the Federal Housing Administration (FHA).
HUD-1 statement A document prepared by a closing agent with an itemized listing of closing costs including escrow deposits for taxes, commissions, loan fees, hazard insurance, and mortgage insurance payable at the closing of the property. Also called closing statement or settlement sheet.
HVAC Heating, Ventilation and Air Conditioning; a home’s heating and cooling system.

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Impact fees Fees imposed on developers when developing a new jurisdiction to help cover the costs of the impact the new neighborhood will have on the community. The fees are then passed onto the new property owners rather than the tax payers. These fees help cover services that residents will need, such as schools, parks, road improvements and sewerage.
Impound account Also called an escrow account. These accounts, which are held by the lender, into which the borrower makes payments used for property taxes and insurance. Money is added to the account every time a mortgage payment is made and the lender assumes the responsibility of fund disbursement. The term is sometimes shortened to impounds.
Inclusionary Zoning A common practice in urban areas, and when planning new communities and developments that provides housing to all income brackets. Inclusionary zoning ordinances often require a set percentage of affordable housing units.
Income property Non owner occupied property that is rented to others
Index A table of interest rates being paid on debt that is used to determine interest-rate changes for adjustable-rate mortgages and other variable rate loans such as credit card debt.
Infrastructure Basic structures that a community needs, such as schools, roads, water and electrical lines, power plants and communications systems.
Initial interest rate The starting percentage a borrower pays for the use of money on an adjustable-rate mortgage.
Installment contract A payment agreement in which the buyer makes a series of payments.
Installment credit A type of credit or loans in which a monthly payment is made for a specified amount of time. The most common forms of installment credit are mortgages and car loans.
Intangible property Non-physical or abstract property that does not have value itself, but represents something else. Stocks, bonds and franchises are examples of intangible property as are patents and copyrights.
Interest In finance, a fee paid for borrowing money, calculated as a percentage of the amount borrowed over a specified period of time. Interest can also refer to a lender’s earnings over time on money loaned, such as the interest paid on a savings account or certificate of deposit.
Interest only loan Initially the borrower pays only the interest on the mortgage over a fixed term in monthly installments. At the end of the interest-only pay period, the unpaid balance of the loan for the principal and any additional interest is then paid off in either a lump sum or in installments.
Interest rate An amount charged per year on a personal or home loan based on a percentage which varies depending on the type of loan.
Interest rate buy-down plan In the first years (usually two years) of a fixed rate loan the borrower pays a fee for lower rate.
Interest rate ceiling The absolute maximum amount of interest a lender can charge a borrower for an adjustable rate mortgage.
Intermediate-term mortgage A mortgage loan with a loan term equal to or less than 20 years.
Investment income Your gross income from property held for investment such as interest, dividends, annuities and royalties.
Investment property Real estate that generates income, such as an apartment building or a rental house.
Investor A person who borrows money to invest in property and uses it as a capital investment and not as his residence.

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Joint account A bank account that is owned by two or more persons and who shares in the rights and liabilities of the account.
Joint credit Credit issued to a couple based on both of their incomes, credit reports, and assets.
Joint liability When two or more people assume responsibility to repay debt.
Joint tenancy When two people own an undivided interest in the property. Upon one person’s death, the other has the title to the entire property.
Judgment a legal decision; when requiring debt repayment, a judgment may include a property lien that secures the creditor’s claim by providing a collateral source.
Judicial foreclosure An order from a judge demanding that a property be sold to repay a debt.
Jumbo mortgage Any mortgage where the loan amount exceeds the limits set by Fannie Mae, Freddie Mac and Ginnie Mae. These mortgages have higher interest rates than conventional mortgages.
Junior mortgage A loan that is lower than the primary loan, or first mortgage.

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Keogh plan A retirement plan for self employed people which is tax deferred. People are able to deposit 20 percent of the current incomes and the funds are not available for withdrawal until age 59-1/2.

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Laddering Making deposits into investments, such as CDs, on staggering dates to vary the rates of return.
Land contract An agreement for the purchase of property where the buyer is allowed to take possession of the land while making payments but the seller holds the title until the last payment is completed.
Late charge A charge assessed on the borrower for not making the loan payment on time.
Late payment fee A fee charged to the borrower for not making the payment on time.
Latent defect A problem with the property that cannot be easily seen. These defects can include the presence of radon, asbestos, or hidden pests, like termites.
Lease An agreement where the property’s owner allows a tenant to use the property in exchange for monies for a set amount of time. This may also pertain to an automobile where the borrower uses the vehicle for a set amount of time in exchange for lease payments. At the end of the lease period, the borrower gives the car back to the dealer or arranges to buy the automobile.
Lease extension Extending a lease on a property or car past the original end date, typically on a month to month basis.
Lease option The right to buy the property for a designated price at the end of the original lease period.
Lease purchase mortgage An option for a potential homebuyer which will allow you to lease a property with the option to buy. The mortgage is often constructed so that the monthly payment will cover the owner’s rent and a little extra which is put into an account and can be used for a down payment at the end of the lease.
Leasehold estate A tenant’s right to use the property for a specific time period.
Lease-like loan A loan which originates from a credit union and will save the borrower as much as 30 percent due to a big balloon payment at the end of the loan period. This loan may combine features of an auto loan and a lease. There is no down payment or security deposit required.
Lessee The person who signs for the lease.
Lessor The person who is granting a lease.
Letter of intent This is a formal notice that the buyer is serious about purchasing the property but is not legally enforceable.
Leverage The use of a large loan and a small amount of cash to make a purchase.
Liabilities All of the borrower’s debts and legal obligations.
Liability insurance-auto A part of the owner’s auto insurance policy that will cover injuries and damage that you, the driver, cause to other drivers and their vehicles when you are at fault in a car accident.
Liability insurance-home Part of the home owner’s insurance policy that protects the home owner against claims from other people for personal injury or property damage.
LIBOR (London Interbank Offered Rate) A daily reference rate based on short-term interest rates charged among banks in the foreign money market. LIBOR rates are commonly used as a reference rate or index for adjustable-rate mortgages.
Lien It is the settlement of a legal claim like a mortgage debt made when a property is sold. If there is more than one debt, each debt considered a lien, is paid off in order.
Life cap A limit or ceiling on the amount a borrower’s interest rate can increase or decrease over the life of the loan.
Lifeline account An account option made mandatory in many states which allows low income customers to have a checking account or savings account. These accounts are basic accounts which incur no monthly fees and require no minimum deposit.
Lifetime learning credit A tax credit available for a portion of qualified tuition, education, and all related costs. This credit can be claimed for anyone is the taxpayer’s family.
Lifetime rate cap This cap limits the amount that an interest rate can increase or decrease in an adjustable rate mortgage of the life of the mortgage.
Line of credit The maximum amount a financial institution is committed to lend to a borrower during a designated time period.
Liquid assets Property and cash that is easily accessible and can be turned into fast cash.
Liquidation When the debtor’s property is sold and the proceeds are used to the benefit of the creditors.
Liquidity The ability to convert assets into cash without losing significant value.
Lis pendens A notice which has been filed or recorded to alert all interested parties that there is pending real estate lawsuit over the title or piece of property.
List price The bottom line price as established by the manufacturer. It is a good practice to not purchase items at list price.
Listing The green light or authorization for a real estate agent to market and sell a piece of land or home.
Loan application The documentation necessary for applying for a loan which lists and highlights the potential borrower’s financial situation.
Loan application fee A fee charged by the lender in order to accept and process the loan application.
Loan consolidation Usually referenced in terms of student loans. This process allows students to combine several educational loans into one new loan, extending the loan repayment period, and permitting one monthly payment. This is generally a relief to newly graduated students since the combined loan repayment is substantially less than paying several loans each month.
Loan fraud A federal crime committed when a borrower gives false information on a loan application in order to qualify for a better loan.
Loan origination When a mortgage lender receives a mortgage which is secured by real property. Also described as the process by which a lender comes to obtain a loan.
Loan origination fee A fee assessed by the lender for underwriting a loan. This fee covers the time and preparation associated with the inception of a new loan.
Loan processing fee Similar to a loan origination fee. A fee charged by the lender for accepting a new loan application and gathering all the necessary documentation.
Loan servicing The process of collecting and managing monthly payments. Typically a separate company which processes the payments, sends statements, manages the escrow/impound accounts and makes sure that taxes and insurance premiums made on time. Sallie Mae is an example of a company who services student loan accounts.
Loan term The period of time in which the borrower has to repay the loan as specified in the original loan contract. Auto loans are typically 4 years, whereas mortgages have a loan term of 15 or 30 years.
Loan to value ratio (LTV) It is the ratio of the home loan taken to the appraised value or the sale price, whichever is lower. Lower the LTV, better are the terms offered to the borrower.
Lock The guarantee you should receive from your lender stating that the mortgage rate quoted will not change for a set amount of time. You want to the lock to stay in effect until closing.
Lock and float A situation where a borrower can lock in an interest rate on a mortgage over a specific amount of time while also letting the rate float down if the market improves before the closing date.
Lock-in An agreement in which the home buyer is guaranteed a specified rate of interest, provided the loan deal is closed within a certain period of time, It also includes the cost to be paid at closing.
Long term capital gain or loss Your total profit or loss from a capital asset that was yours for a period of more than 12 months.
Loss mitigation A situation where the lender will help the borrower when they are in danger of default to avoid foreclosure.
Low documentation loan A loan designed for persons’ that are self employed, recent immigrants, or entrepreneurs that may not want to reveal information of their incomes. These loans require exceptional credit history, a substantial down payment, and incur a higher interest rate.
Lowball offer An offer on a piece of property that is way below the market value.
Low-down mortgages A loan where the down payment is under 10 percent. The US government has made these types of loans more available through agencies like Fannie Mae, to help more people own a home.

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Manufactured housing Homes that are built in a factory that can be placed temporarily or permanently on a piece of land. These homes range in style and price. They range anywhere from a trailer/mobile home to a custom looking home.
Margin It is the amount added to the index rate on ARM in order to get an adjustable interest rate by the lender.
Market conditions Factors that influence the sales of homes in specific areas, such as interest rates, home appreciation, employment rates, and time of year.
Market value The price that a property is worth based on an agreeable situation between ready buyers and content sellers who have disclosed all the facts about the property.
Master planned community A large development where all of the amenities that make a community are factored into the planning before construction commences. The community will include parks, shopping areas, and recreation. Often, these communities will be gated.
Maturity It is the due date for repayment of any financial instrument or loan or bond.
Maturity date Regarding certificates of deposit, the date when the CD stops paying interest and the principal is given back to the buyer.
Maximum financing When a lender’s lowest permissible down payment is made, the borrower is given a mortgage with maximum financing.
Mechanical systems Including the heating, cooling, plumbing and electrical systems in a house.
Median price As asking price for a house which is an amount where half the houses in the same area sell for less and half sell for more.
Member bank A bank with a membership in the Federal Reserve System.
Merged credit report A combined credit summary from all three credit bureaus. These credit bureaus include: Experian, Transunion, and Equifax.
Merit aid Education assistance given to students based on academic achievement, athletic, musical, or other talents and is not granted based on need.
Metes and bounds A legal description of a parcel of land based on a surveyor’s findings of measurements and angles.
Mileage allowance or mileage limitation Mileage allowance, or mileage limitation, is the number of miles a leased vehicle can be driven while the lease is in force. If the mileage allowance is exceeded, the lessee is assessed a fee.
Mileage charge Mileage charge is an assessment incurred by auto lessees who exceed the mileage limit on a leased vehicle. Typically, a lease would allow the leased car to be driven about 15,000 miles per year.
Mill In reference to real estate taxes, some states use a unit of taxation that equals one tenth of one cent, or $1 on every $1,000 of taxable property value.
Mill rate Mill rate, or millage rate, is a property tax term referring to the amount of tax charged for each dollar of a property’s assessed value. The rate is expressed in mills, where one mill equals one-tenth of one cent, or $0.001.
Millage rate Millage rate, or mill rate, is a property tax term referring to the amount of tax charged for each dollar of a property’s assessed value. The rate is expressed in mills, where one mill equals one-tenth of one cent, or $0.001.
Min add’l invest Min add’l invest, or minimum additional investment, refers to the smallest dollar amount that can be invested or contributed to an existing account. Mutual funds, for example, usually have a minimum additional investment.
Min check Min check, or minimum check, is the lowest amount for which a draft can be written. This minimum restriction might be placed on a money market fund that has limited check-writing capabilities.
Min invest Min invest, or minimum investment, is the smallest investment amount allowed, expressed either in dollars, or in share quantity. Mutual funds and bonds sold to individual investors often have minimum investment requirements.
Min IRA invest Min IRA invest is the minimum balance required to open an Individual Retirement Account (IRA).
Mini perm Mini perm is a type of financing typically used for commercial, industrial, or multi-family property. Commercial properties often cannot qualify for long-term, permanent financing until they’ve established operating histories; mini perm loans, therefore, are used to pay off the construction loans and bridge the gap until the property can qualify for permanent financing. Mini perms are typically structured with a three- to five-year maturity.
Minimum average balance to avoid fees Minimum average balance to avoid fees is a requirement placed on some deposit and checking accounts. If the average balance (i.e., the daily balance divided by the number of days) falls below the minimum level, a maintenance fee will be charged to the accountholder.
Minimum balance to avoid fees Minimum balance to avoid fees is a requirement placed on some deposit and checking accounts. If the balance at any point during a certain period–usually a month–falls below the stated level, the accountholder will be assessed a maintenance fee.
Minimum balance to open an account Minimum balance to open an account is a requirement placed on some deposit, checking, and investment accounts. The account cannot be opened with any amount that’s less than the stated minimum.
Minimum deposit Minimum deposit is the smallest amount necessary to open an investment or mutual fund account. Minimum deposit amounts can range from a few hundred to a few thousand dollars.
Minimum down payment Minimum downpayment is the lowest amount of cash that a borrower must put into a home purchase in order to qualify for the mortgage loan. The minimum down payment can be determined by the lender’s standard requirements, by the borrower’s income, or both.
Minimum payment Minimum payment is the smallest payment amount a creditor will accept on a revolving debt without charging a penalty. Minimum payments are usually calculated as a small percentage (such as 3 percent) of the outstanding balance.
Minimum payment option mortgage A mortgage option where the borrower can pay an extremely low monthly payment, this usually will not cover the interest and the subsequent month’s balance will be higher.
Mint condition Mint condition describes a used item that doesn’t exhibit any signs of wear or age. Usually something described as being in mint condition has a pristine, like-new quality.
Miscellaneous itemized deductions Miscellaneous itemized deductions are certain expenses that can be listed on a U.S. tax return for the purpose of reducing income tax liability. Miscellaneous itemized deductions include job-related expenses, unreimbursed work-related expenses, and tax preparation fees. These expenses can only be deducted if they’re in excess of 2 percent of the taxpayer’s adjusted gross income.
Misselling Misselling is the practice of intentionally misleading an individual about the details of a product or service in order to make the sale. An example of misselling would be when an aggressive salesperson pushes an individual into a high-fee annuity contract, without regard for whether the annuity is really the right program for that individual.
Mixed-income housing A neighborhood with varying income levels.
MLS (Multiple Listing Service) A shared list of information and details on properties that are available in certain areas.
MMA – money market account MMA, or money market account, is a high-yield checking/savings option provided by a bank. MMAs work like other checking accounts, except that they earn competitive yields, have minimum opening balances, and usually have restrictions on the number of withdrawals made within each period. If the bank is FDIC-insured, the MMA would be insured per the FDIC’s coverage limitations.
MMDA MMDA stands for money market deposit account. An MMDA is a high-yield checking/savings option provided by a bank. MMDAs work like other checking accounts, except that they earn competitive yields, have minimum opening balances, and usually have restrictions on the number of withdrawals made within each period. If the bank is FDIC-insured, the MMDA would be insured per the FDIC’s coverage limitations.
Modification A change in the terms of the loan or mortgage agreement.
Modified accelerated cost recovery system Also known as MACRS (pronounced “makers”), the depreciation method generally used since 1986 to figure the deductions you get over the life of tangible property. Depreciation deductions for property in use between 1980 and 1986 are determined under the Accelerated Cost Recovery System (ACRS).
Modified adjusted gross income (MAGI) Modified adjusted gross income, or MAGI, is a measure of income used in the preparation of a U.S. tax return. In general, MAGI is adjusted gross income that’s been increased or decreased by certain deductions and credits. Exact calculations for MAGI differ depending on how it’s being used.   A common use for MAGI is the determination of the deductibility of a Roth IRA, as defined in IRS Form 8606.
Modified fee-for-service Modified fee-for-service is a method that insurance companies and medical groups use to compensate physicians for providing healthcare services. Under this arrangement, the physician is paid a set amount for each service, as defined by a fee schedule. In addition, the physician may be able to earn certain incentives, which are provided by the payer to keep costs low.
Modified pass-through Modified pass-through describes a mortgage-backed security that guarantees interest and principal payments to certificate holders, regardless of whether the underlying mortgage payments are actually received. The payments are guaranteed by the Government National Mortgage Association, also known as Ginnie Mae.
Money at call Money at call describes a loan for which the lender has the right to demand full and immediate repayment.
Money factor A money factor is used to determine the lease rate for an automobile. It is the lease equivalent of the interest rate on a conventional loan. The money factor is the current annual percentage rate divided by 24.
Money management Money management is a general term referring to the responsible use of cash. Money management includes budgeting, saving, paying debts, and investing. The term is also sometimes used interchangeably with investment management or portfolio management, both of which refer specifically to defining and implementing an investment program.
Money manager A money manager is a trained individual who’s paid to research and select investments for customers. Money managers can work for individual, corporate, or institutional investors.
Money market account An FDIC insured deposit account that allows a maximum of six monthly withdrawals. This allows these accounts to remain liquid and are known as stable accounts because they invest in short term debts with maturities of under a year.
Money market funds Mutual funds that invest in short term debts such as Treasury Bills, commercial paper, repurchase agreements, and certificates of deposits. These are not insured by the FDIC. It is possible to lose money with these funds.
Money market mutual fund A fund that invests in short term paper debts, designed to produce high yields without the loss of capital.
Monroney sticker The sticker seen on new car windows which lists the base price, the installed options, the manufacturers suggested retail price (MSRP), and the fuel economy and mileage. This sticker is required by law.
Monthly periodic rate The yearly interest rate divided by twelve.
Mop and glow Yet another way car dealers profit on buyers. An insider term used to describe the little add-ons, like paint sealant, that add no value to the car but add to the dealer’s pocket.
Moratorium A moratorium is a holding period during which a certain activity is temporarily suspended. In bankruptcy, for example, the court puts a moratorium on debt collection, meaning debt collectors have to cease their efforts to contact the debtor.
Morning loan A morning loan is a type of funding offered to brokers for the purchase of security. Funds are advanced with the promise that the broker will deliver the purchased securities to the bank later that same day. Once the securities are received, they become collateral, and the loan is converted to a broker’s loan.
Mortality and expense risk charge Mortality and expense risk charge is a fee charged on a variable annuity contract. The charge is assessed as a percentage of the account value, and is intended to compensate the insurance company for the risks it assumes under the annuity contract. If, for example, the annuity guarantees payments for the insured’s lifetime, the insurance company accepts the risk that the insured will live significantly longer than expected.
Mortgage A lawful document promising a lender a certain property as security or guarantee towards payment of a debt.   Common misspellings: Mortage and Morgage
Mortgage acceleration clause A term in the mortgage agreement that allows the lender to demand the full balance payment under certain circumstances, such as sale of the property, default on payments or refinancing.
Mortgage accelerator A mortgage accelerator is a specialty mortgage loan that combines the characteristics of a checking account with the characteristics of a home equity line of credit. The borrower deposits regular income into the account, which immediately reduces the loan balance. Monthly expenses are paid out of the account, and these increase the loan balance. At the end of the month, any deposited amount that’s not withdrawn to pay expenses, goes towards the loan balance as a principal repayment. Over time, the borrower accrues interest more slowly, and is therefore able to pay off the debt balance more quickly.
Mortgage banker A mortgage banker is an individual or entity that originates real estate property loans in its own name. After funding, the loans might be held in the banker’s portfolio, or sold to investors.
Mortgage Bankers Association – MBA Mortgage Bankers Association, or MBA, is a national industry association that promotes standards of practice for professionals working in real estate finance.
Mortgage banking Mortgage banking is the practice of originating real estate loans. Once the loans are originated, they’re often sold by the mortgage banker to investors.
Mortgage bond A mortgage bond is a corporate debt instrument that’s supported by real estate property collateral. Bondholders have a claim on the collateral property if the corporate borrower defaults.
Mortgage broker A mortgage company is one that has contacts with many lenders and informs the borrower about different loan options available. The mortgage broker accepts the application and processes the loan for a fee. He does not fund the loan.
Mortgage calculator A program that potential homebuyers can use to determine what their monthly mortgage payment will be based on principal, interest, and the terms.
Mortgage constant The mortgage constant is the quotient of the total annual debt payments on a mortgage divided by that mortgage’s original balance. The mortgage constant is also known as the mortgage capitalization rate.
Mortgage debt Mortgage debt is outstanding principal on a loan that’s backed by residential real estate collateral.
Mortgage excess servicing Mortgage excess servicing, on a mortgage-backed security, is the percentage of interest that’s left after subtracting the MBS coupon rate and servicing and underwriting fees from the underlying mortgage note rate. The mortgage excess servicing, which would be a fraction of 1 percent, is paid to the loan servicer.
Mortgage forbearance agreement Mortgage forbearance agreement is a mutually accepted arrangement between a borrower, who has defaulted, and a lender, whereby the lender agrees not to foreclose upon certain conditions. The borrower agrees to a specific repayment plan so that the loan will become current at a certain future date. Forbearance is only appropriate where the borrower fell behind in payments due to a temporary setback.
Mortgage index A mortgage index is the underlying benchmark that drives the interest rate on an adjustable-rate mortgage (ARM). Rates on ARMS have two components: the index and the margin. The index, which is always a published statistic, is the variable component of the rate; it moves up and down as economic conditions change. Examples of mortgage indices include the prime rate, one-year constant maturity treasury, or LIBOR.
Mortgage insurance Insurance that protects the lender from incurring losses against non-payment of home loans. This is required for loans that have an LTV in excess of 80%. When the LTV is more than 80%, the borrower pays higher interest rate to the lender who then pays the premium to the mortgage insurance directly. Certain loan programs like first time home loans are covered by MI irrespective of the LTV percentage.
Mortgage insurance premium (MIP) The amount charged to the borrower for mortgage insurance. Depending on the situation, it may be paid upfront, monthly or annually.
Mortgage interest deduction A tax savings in which the government allows homeowners to deduct home loan interest from their income before calculating their taxes.
Mortgage interest expense A tax term for interest paid on a loan secured by your home that is fully deductible, up to certain limits, when you itemize income taxes.
Mortgage lien A mortgage lien is the claim that a lender places on a property when that property is used to secure a loan. If the property owner defaults on the loan, the lender (or lienholder) has the right to foreclose and sell the property.
Mortgage life insurance A policy taken out which covers the mortgage of the property if the owner dies.
Mortgage loan A mortgage loan is a debt instrument that is secured by real estate property. The terms mortgage loan and mortgage are used interchangeably.
Mortgage note A mortgage note is a document that details the terms of a promise to repay a real estate loan. The note will list the names of all borrowers and lenders, as well the loan amount, rate of interest, and structure and timing of repayments.
Mortgage originator A mortgage originator is a company or individual that assists prospective borrowers through the loan application and funding process. The originator provides the initial loan funding, but may sell the loan to another entity shortly after funding. Mortgage brokers and mortgage bankers can be mortgage originators.
Mortgage par rate A mortgage par rate is a reference point used by lenders to evaluate a mortgage’s value. If a mortgage carries an interest rate higher than the par rate, the lender will pay a premium to purchase that mortgage. If the mortgage’s rate is lower than the par rate, the lender will only pay less than face value to purchase the mortgage.
Mortgage pass-through security A mortgage pass-through security is an investment vehicle that’s backed by a pool of mortgage loans, where the investor receives principal and interest payments (less a fee) as payments are made on the underlying mortgage loans.
Mortgage pipeline A mortgage pipeline is the collection of loans that have been approved and locked in by the mortgage originator, but not yet funded. Mortgage loans are taken out of the pipeline if the borrower backs out, or if the loan funds. Upon funding, the loans are either sold on the secondary market, or placed in the originator’s portfolio.
Mortgage pool A mortgage pool is a group of real estate loans that are used as collateral to support a mortgage-backed security, or MBS. Mortgage pools often contain loans that have similar maturities and terms, but the pool can also be more diversified for complex securities.
Mortgage rate Mortgage rate is the percentage used to calculate interest expense on a real estate loan.
Mortgage rate lock A mortgage rate lock is an agreement between a prospective borrower and lender that the mortgage loan will be available to the borrower at the stated interest rate for a certain period of time. If market rates change before funding, it doesn’t affect the locked mortgage loan.
Mortgage rate lock deposit A mortgage rate lock deposit is a non-refundable amount that a lender will charge a prospective borrower to guarantee a certain interest rate on a mortgage loan, under the condition that the loan funds within a certain timeframe. Once the loan funds, the deposit is credited back to the borrower. Not all lenders charge mortgage rate lock deposits.
Mortgage rate lock float down A mortgage rate lock float down is a type of deposit that a prospective borrower can put down to fix the interest rate on a mortgage loan. Rate locks are put in place after the loan is approved and before the loan funds. A rate lock with a float down option protects the prospective borrower from rate increases, but also allows the borrower to take advantage of rate decreases that occur prior to funding. This arrangement is more expensive than a conventional rate lock deposit, which merely fixes the rate at a set value.
Mortgage recast A mortgage recast is a permanent alteration of a mortgage’s payoff structure. Some mortgage loans allow for recasting under certain situations, such as when the borrower is financially distressed. In this case, the maturity could be extended, or the interest rate could be reduced. Mortgages that allow unpaid interest to be added into the principal balance (e.g., option ARMs), have to be recast so that the debt is eventually repaid.
Mortgage refinance The option to pay off an old loan with a new one. This typically saves the borrowers money in terms of a lower interest rate or lower payments. The borrower may also opt to get cash out of his or her equity.
Mortgage REIT A mortgage REIT (real estate investment trust) is an entity that invests in real estate property loans. The REIT may act as a mortgage originator, or purchase the loans on the secondary market. Mortgage REITs obtain their equity capital by selling shares to investors who want to participate in the REIT’s professionally managed portfolio.
Mortgage risk Mortgage risk is the likelihood that the borrower on a real estate property loan will not make the debt payments as promised.
Mortgage servicing Mortgage servicing is the process of managing the administrative details of a mortgage loan. These details include collecting principal and interest payments, forwarding repayments to the mortgage lender (if the lender is not the servicer), managing escrow accounts, making payments to insurance companies and tax collectors, etc. Mortgage servicers earn a fee. Also, the rights to service a loan can be bought and sold, just as the loan itself can be bought and sold.
Mortgage servicing rights – MSR Mortgage servicing rights, or MSR, is a claim on the responsibility to administer a mortgage and earn the resulting fee. Mortgage servicing involves collecting principal and interest payments, forwarding repayments to the mortgage lender (if the lender is not the servicer), managing escrow accounts, making payments to insurance companies and tax collectors, etc. Mortgage servicing rights can be bought and sold.
Mortgage-backed certificate A mortgage-backed certificate is a security that allows investors to participate in a portfolio of mortgage loans. The security is supported by an underlying pool of mortgages, so that investors earn income as repayments are made on those mortgages. Mortgage-backed certificates are also known as mortgage-backed securities (MBS).
Mortgage-backed securities – MBS Mortgage-backed securities, or MBS, are investment vehicles that allow investors to participate in a portfolio of mortgage loans. The security is supported by an underlying pool of mortgages, so that investors earn income as repayments are made on those mortgages. Mortgage-backed securities are also known as mortgage-backed certificates.
Mortgage-backed security A mortgage-backed security, or MBS, is an investment vehicle that allows investors to participate in a portfolio of mortgage loans. The security is supported by an underlying pool of mortgages, so that investors earn income as repayments are made on those mortgages. Mortgage-backed securities are also known as mortgage-backed certificates.
Mortgagee The mortgage lender who recieves the mortgage as a pledge for repayment of the loan.
Mortgage-interest deduction Mortgage-interest deduction is an IRS-defined tax break available to homeowners who have a mortgage loan. Mortgage interest is normally deductible if the related financing is used to purchase or improve a primary or secondary home.
Mortgager A mortgager is the borrower on a real estate property loan.
Mortgagor The mortgage borrower who gives the mortgage as a pledge for repayment.
Motivated buyer A buyer who is in a hurry to buy property.
Motivated seller A seller who has an urgent reason to sell their property quickly.
Move up buyer A buyer who is moving into a more expensive house.
Move-in condition A house that is ready for new owners to move in.
Move-up buyer A move-up buyer is a prospective homebuyer who owns a home already, but wants to replace that property with a larger, or more expensive home.
Moving expenses Expenses accumulated from moving oneself, your family and possessions due to a job. These expenses are tax deductible. Save all of your receipts from the move.
MSRP Acronym which stands for Manufacturer’s Suggested Retail Price.
Multidwelling property A multidwelling property has more than one living unit on a single plot of land.
Multifamily mortgage A loan used to buy an apartment building and where the property is collateral.
Multiple Listing Service – MLS Multiple Listing Service, or MLS, is a marketing organization comprised of real estate brokers who agree to pool their home listings. The MLS makes the home search more efficient for home seekers, and provides brokers with access to a larger audience.
Municipal housing inspector An employee of the government who is sent out to inspect homes that are under construction to ensure that the contractors are building to code.
Mutual fund A mutual fund is a professionally managed portfolio of securities that builds capital by selling shares to investors. Mutual funds give the individual investor access to a diversified, regulated portfolio. The fund publishes its investment strategy and objective along with its historic performance in a prospectus. Gains or losses in the portfolio are shared by the shareholders/investors.

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Naked call A naked call is the offer of a call option for a security that’s not owned. If the security’s trading price changes such that the exercise price on the option represents an attractive investment, the option seller may have to buy the shares on the open market and sell them at a loss to the option holder. For this reason, selling naked call options is a very risky strategy.
Named perils insurance policy A named perils insurance policy is a type of homeowner’s insurance, where the property is covered against damage resulting from specific circumstances, such as fire or theft. A named perils policy provides a more specifically defined set of coverages relative to a conventional, broad coverage policy.
National Association of Insurance Commissioners – NAIC The National Association of Insurance Commissioners (NAIC) is the organization of insurance regulators from the 50 states, the District of Columbia, and the five U.S. territories. The NAIC provides a forum for the development of a uniform policy when uniformity is appropriate.
National Association of Investors Corporation – NAIC National Association of Investors Corporation, or NAIC, is a non-profit entity that provides education, tips, and resources pertaining to the practice of investing. The NAIC is comprised of investors, investing groups, individuals, and corporations.
National Association Of Mortgage Brokers – NAMB National Association of Mortgage Brokers, or NAMB, is a U.S. trade association that educates, sets standards for, and represents the interests of mortgage brokers. Mortgage brokers are individuals or entities that assist mortgage applicants in obtaining home financing.
National Association Of Real Estate Investment Trusts – NAREIT National Association of Real Estate Investment Trusts, or NAREIT, is a U.S. trade organization that acts as the voice of REITs and other publicly traded real estate companies. The NAREIT community is comprised of REITs and businesses and individuals who operate in the REIT and related industries.
National Automobile Dealers Association Often referred to as NADA. Publishes an Official Used Car Guide that is helpful to customers by supplying retail prices for most used cars and provides car dealers with a confidential list of trade in values.
National bank These banks are chartered by our government and it is mandatory that they are members of the Federal Reserve System.
National Credit Union Association National Credit Union Association, or NCUA, is the chartering agency for federal credit unions in the U.S. The NCUA also manages the National Credit Union Share Insurance Fund (NCUSIF), and promotes consumer education through a variety of programs. The NCUSIF insures consumer deposits that are held in credit unions, just as the FDIC does for banking institutions.
National Credit Union Share Insurance Fund The National Credit Union Share Insurance Fund (NCUSIF) insures consumer deposits held in credit unions, just as the FDIC does for banking institutions.
National Do Not Call Registry By calling 1-888-382-1222, you can register your phone numbers so that telemarketers cannot call you for a period of five years.
National Foundation for Consumer Credit National Foundation for Consumer Credit, or NFCC, is a non-profit organization that accredits consumer credit counseling agencies.
National issuers National issuers are large banking entities that offer consumer credit cards, among other services. Bank of America, for example, is a national issuer.
NCUA NCUA stands for National Credit Union Association. The NCUA is the chartering agency for federal credit unions in the U.S. The NCUA also manages the National Credit Union Share Insurance Fund (NCUSIF), and promotes consumer education through a variety of programs. The NCUSIF insures consumer deposits that are held in credit unions, just as the FDIC does for banking institutions.
NCUSIF NCUSIF stands for National Credit Union Share Insurance Fund (NCUSIF). The NCUSIF insures consumer deposits that are held in credit unions, just as the FDIC does for banking institutions.
Need What the cost of a higher education is minus the expected family contributions and outside resources, like scholarships and grants.
Need-based aid Financial resources given to students based on their financial status and expected contributions as determined by the Federal Application for Student Aid (FAFSA).
Need-based pricing A method of pricing a home based on what the owner wants to get for the property without regard to what other homes are selling for. This method is not commonly advisable.
Needs approach The needs approach is a type of analysis that estimates how much life insurance an individual requires. The analysis estimates the expenses that will have to be covered if the insured were to pass, including funeral costs, legal fees, mortgage expenses, debt payments, future living expenses, etc.
Needs-based pricing Needs-based pricing is one method of establishing an asking price for an object that’s to be sold. In real estate, for example, a seller might price the home to recover the initial purchase price, plus the cost of any renovations. Unfortunately, if this asking price is higher than what the market will bear, the home will not sell.
Negative amortization This happens when the interest due on the loan is more than the monthly payments. The balance unpaid interest is added to the balance of the loan. In negative amortization the loan of the borrower increases and thus he ends up owing more than the original loan.
Negative amortization limit Negative amortization limit is a cap on the amount of accrued interest that can be added to the principal balance of a loan that allows negative amortization. Negative amortization occurs when a loan’s minimum payments are less than that period’s accrued interest.   The shortfall is added into the loan balance at the end of each period. The limit is usually defined as a percentage of the opening loan balance.
Negative carry Negative carry occurs when the cost to finance an investment purchase exceeds the yield produced by the investment. For example, if an investor borrows money at 8 percent interest, and uses those funds to purchase a bond that pays 5 percent interest, the investor would be losing 3 percent interest on the investment.
Negative equity Negative equity occurs when the value of an asset securing a loan dips below the loan balance. For example, an individual could take out a mortgage loan to finance 100 percent of a home purchase. If the home’s value subsequently drops, due to recession, for example, the homeowner would have negative equity. Selling the home would require the homeowner to pay out of pocket to cover the difference between the sales price and the loan balance.
Negative equity financing A situation when a new car buyer owes more on their trade in than the car is worth.
Negative points Negative points are used by a lender to rebate either a mortgage broker, or a mortgage borrower, for a mortgage that carries a higher-than-par interest rate. This rebate might be paid as a fee to the mortgage broker, or can be paid to the borrower to offset closing costs. No-cost mortgage loans use negative points; the borrower essentially trades a higher interest rate for lower upfront costs.
Negative yield curve A negative yield curve describes an economic environment characterized by long-term yields being lower than short-term yields. A simple example of this is when a five-year CD pays 3 percent, and a six-month CD pays 4 percent. Negative yield curves often precede economic recession. The negative yield curve is also called an inverted yield curve.
Negative-equity financing Negative-equity financing is a loan that’s funded for an amount that exceeds the value of the collateral asset. This can happen with car loans; a buyer might want to trade in a vehicle that’s depreciated below the outstanding loan balance. The new auto loan would have to cover the cost of the new car, plus the difference between the old loan balance and the old vehicle’s trade-in value.
Negatively amortizing loan A negatively amortizing loan is a financing arrangement where the minimum periodic payments due are less than the interest accrued in the same period. The unpaid interest is added into the loan, thus increasing the principal balance. A loan with this structure will have some limit on the amount of negative amortization that can occur. After that limit is reached, the borrower will have to make fully amortizing payments.
Negotiable instrument A negotiable instrument is a written document that states a promise to pay the holder. Checks, acceptances, and bills of exchange are negotiable instruments.
Negotiable order of withdrawal (NOW) account A negotiable order of withdrawal (NOW) account is an interest-earning bank deposit account against which the accountholder can write drafts.
Nellie Mae An affiliate of Sallie Mae loan servicing. A large non profit provider of student loans under the Federal Family Education Loan Program.
Nest egg Nest egg is a slang term for an amount of money that’s saved for a special purpose. Individuals commonly build nest eggs for things like college tuition, retirement, or a new home purchase.
Net cash flow Investments that generate income after the principal, interest and insurance expenses have been paid.
Net debt to assessed valuation Net debt to assessed valuation is a measure of the financial health of a municipality. As such, it’s an important metric in evaluating the risk of bonds issued by that municipality. The ratio is calculated by the value of the municipal’s net debt divided by the combined taxable value of properties in that municipality’s jurisdiction.
Net debt to estimated valuation Net debt to estimated valuation is a measure of the financial health of a municipality. As such, it’s an important metric in evaluating the risk of bonds issued by that municipality. The ratio is calculated by the value of the municipality’s net debt divided by the estimated market value of property in that municipality’s jurisdiction.
Net income The amount left of your income after taxes have been paid.
Net interest margin securities – NIMS Net interest margin securities, or NIMS, are investment vehicles that pay investors the excess cash flows generated from the repayment of an underlying group of mortgage loans.
Net operating loss (NOL) A net operating loss (NOL) occurs when a business is unprofitable from a tax standpoint. NOLs can be used to recover past taxes paid or carried forward to offset future taxes.
Net worth The total sum of all of your assets minus all debts. Assets include your home, car, investments, etc. Debts include mortgages, credit cards, and loans.
New home sales New home sales is an economic indicator that tracks the number and prices of new homes sold during a month. The new homes sales metrics are published by the U.S. Department of Commerce’s Census Bureau.
NFCC (National Foundation for Credit Counseling) An organization that educates consumers about using and managing credit. This nonprofit company is the parent group for Consumer Credit Counseling Services.
Niche banks Niche banks are financial institutions that target a specific customer base. For example, a bank that aligns its marketing messages and product offerings to attract people who enjoy extreme roller coasters would be a niche bank.
Nigerian Scam Nigerian scam is the name of a prevalent hoax that lures an individual into handing money over to a stranger. The scam often involves an email letter that describes a huge cash commission; the commission is said to be available to the person who helps facilitate a large monetary transfer. The scammer will ask for money upfront to cover transaction costs. If the money is provided, the scammer will either try to get more money, or simply disappear.
NIMBY (Not In My Backyard) NIMBY stands for Not In My Backyard. The term refers to the tendency for individuals to oppose having certain developments located near their homes, even though they may not be opposed to those developments in theory. Consider a halfway house, for example; residents might argue against having a halfway house located next door, even if they aren’t uniformly opposed to halfway houses in general.
No cash out refinance A home mortgage for a lower interest rate in an amount that doesn’t exceed closing costs.
No documentation mortgage – no doc A no documentation mortgage, also called a no doc, is a real estate property loan that doesn’t require the borrower to present paperwork to verify his income during the approval process. No doc mortgages are more expensive than fully documented mortgages due to the chance that the borrower might overstate his earnings.
No fault insurance No fault insurance is a plan that provides accident coverage to the insured, regardless of who caused the incident. Some U.S. states have no-fault auto insurance laws, where insureds recover damages from their own insurance companies. Such a system eliminates the need to sue the other party and establish fault.
No income/no asset mortgage – NINA A no income/no asset mortgage, or NINA, is a real estate property loan that can be approved without documentation that verifies the borrower’s regular earnings and asset base. Usually, the lender will verify the borrower’s employment. NINAs are more expensive than traditional mortgage loans, due to the risk that the borrower will overstate his qualifications to obtain a loan approval.
No-cost loan No-cost loans are loans where the lender may not directly charge the borrower like appraisal, recording, settlement fees etc. This has to be clarified with the lender before taking the loan. The borrower has to pay a higher interest rate for a no-cost loan.
No-doc loan A shortened term for �¢ �¬��No documentation loan�¢ �¬ �. When a borrower supplies a minimum amount of information and the lender makes their decision based on credit history and the size of the down payment. These loans typically have a higher interest rate.
No-documentation loan When a borrower supplies a minimum amount of information and the lender makes their decision based on credit history and the size of the down payment. These loans typically have a higher interest rate.
No-fee mortgage A no-fee mortgage is a real estate property loan that doesn’t have any upfront fees or closing costs. Generally speaking, a no-fee mortgage will have a slightly higher interest rate than a traditional mortgage.
No-lien affidavit A no-lien affidavit is a written statement that a particular property has no claims on the title. The no-lien affidavit is signed by the property owner.
Nominee recipient A nominee recipient is a U.S. taxpayer who receives a 1099-DIV or 1099-INT for dividend or investment earnings that partially belong to another party or parties. The nominee recipient must provide the IRS and the other parties with the breakdown of each party’s taxable earnings.
Non performing asset The term used when an asset in no longer accruing interest.
Non-amortizing loan A non-amortizing loan is structured with interest only or minimal principal payments, such that the balance is not steadily paid down to zero at maturity. At some point, the borrower will need to refinance the principal amount, or make a large balloon payment.
Non-Assumption clause statement in a mortgage contract forbidding the assumption of the mortgage by another borrower without the prior approval of the lender.
Non-callable Non-callable describes a financial instrument, such as a preferred stock or bond, that can’t be redeemed by the issuer before a specified maturity date. The non-callable feature is attractive from an investor’s standpoint because it eliminates prepayment risk.
Non-conforming loan A non-conforming loan is a debt arrangement that doesn’t meet certain defined standards. Most often the term is used in reference to mortgages; a non-conforming mortgage doesn’t meet federal standards that qualify a loan for repurchase or guarantee by Fannie Mae and Freddie Mac.
Non-contestability clause A non-contestability clause is legal verbiage that punishes a beneficiary for attempting to dispute a will. Such a clause may also be used in a life insurance policy to prohibit the insurance provider from denying payment due to an error on the application.   Usually, the clause gives the insurance provider a limited time period for contesting a claim. Non-contestability clauses, particularly with respect to wills, don’t always hold up in court.
Nondischargeable debt Nondischargeable debt is an obligation that can’t be wiped away by a bankruptcy court. Bankruptcy courts aren’t authorized to remove a debtor’s personal obligation for tax claims, child support claims, alimony claims, and other specified debt types.
Non-financial asset A non-financial asset is a physical item of worth, such as real estate, vehicles, or equipment. The value of a non-financial asset is derived from its physical qualities. This compares to financial assets, such as stocks or bonds, which are intangible in nature.
Non-liquid asset A property or possession that cannot easily be turned into cash.
Non-owner occupied Non-owner occupied describes a residential property that’s not the owner’s primary or secondary residence. Usually, the term is applicable to a single-family home that’s rented out. The description is important from a mortgage standpoint, because lenders perceive a non-owner occupied property mortgage as being riskier than an owner-occupied property mortgage.
Nonpassive income Nonpassive income describes earnings that are actively generated, such as wages and business profits where the taxpayer materially participates in the business operations. This compares to passive income, which is generated through investment vehicles. The classification of earnings as nonpassive or passive is important in the calculation of income taxes.
Nonpayroll withholding Nonpayroll withholding is a term for prepaid income tax payments related to investment income, gambling winnings, and other non-wage earnings.
Nonperforming asset A nonperforming asset is a lending and leasing term used to describe an obligation that’s not being paid as promised. While loans and leases are liabilities from the consumer’s perspective, they’re assets from the lender’s perspective. When a debtor stops making payments as promised, the asset is no longer producing the desired results for the lender. The term can also be used more generally in reference to any asset that’s not generating income.
Nonproductive loan A nonproductive loan is a commercial debt obligation that doesn’t enhance or improve the production levels of an economy. A loan that restructures a company’s existing debt would be nonproductive, while a loan that finances the construction of a new manufacturing facility would be productive.
Non-qualified stock options Non-qualified stock options, or NSOs, are a form of employee compensation that give the employees the right to purchase the employer’s stock at a stated price. The non-qualified descriptor means that these options are not eligible for deferred tax treatment, and a tax event occurs in the year the employee exercises the option. The employee is taxed on the difference between the market price of the stock and the exercise price.
Non-qualifying investment A non-qualifying investment is any asset purchased for financial gain that’s not eligible for preferential tax treatment. Securities held within an IRA, for example, qualify for certain tax advantages, while a regular savings deposit does not.
Non-recurring closing costs The fees paid at the close of a real estate settlement. The fees cover loan origination, the title insurance, escrow fees, and credit report management.
Nonrefundable credit A nonrefundable credit reduces tax liability dollar-for-dollar, but can’t reduce tax liability to less than zero. In other words, a nonrefundable tax credit might reduce one’s tax liability to zero, but it would never result in the government owing money back to the taxpayer.
Nonresident alien A nonresident alien is an individual who doesn’t live in the U.S., and is not a citizen of the U.S. Nonresident aliens are taxed by the U.S. on income generated from U.S. sources.
Non-revolving credit card A non-revolving credit card is a credit account that requires payment of the full balance outstanding at the end of each billing period.
Nontaxable distribution A nontaxable distribution is a payment made by a company to its shareholders; this payment is not treated as income or as a regular dividend. Instead, the payment is accounted for by the shareholder as a reduction in cost basis. The tax effect of the distribution will then be realized when the share is sold.
No-ratio mortgage A no-ratio mortgage doesn’t require the calculation of the borrower’s debt-to-income ratio during the approval process. The lender will, instead, base the mortgage underwriting on other factors, such as the borrower’s downpayment and credit history. This may be appropriate in cases where the borrower has a volatile income stream. No-ratio mortgages are considered riskier than conventional mortgages and, therefore, are more expensive.
Normal yield curve A normal yield curve is an interest rate environment where long-term debt instruments (such as bonds) exhibit higher returns than similar short-term debt instruments. A normal yield curve is also called a positive yield curve.
Note A legal document stating the obligation of the borrower to repay the stated sum of money at a specified interest rate at a specified date or on demand.
Note loan A note loan is a debt facility that’s not supported by collateral.
Note rate A percentage that a borrower pays for the use of the money. Also expressed as the annual percentage rate as disclosed in the terms of the loan.
Notice of assessment – NOA Notice of assessment, or NOA, is a yearly tax statement sent by a taxing authority to taxpayers. U.S. property owners receive notices of assessment for property taxes owed. Other taxing authorities, such as the Australian Taxation Office and Canada Revenue Agency, send notices of assessment for income taxes.
Notice of default A documentation that is made public that states that the borrower is in default and legal action may be taken. There are many options available to borrowers to help them avoid this situation.
Notice of sale A notice of sale is an official announcement of an upcoming sale transaction. Most often, the term is used in reference to foreclosure, where the lender is required to announce its plans to sell off the collateral. A municipal bond issuer may also issue a notice of sale as a way of requesting bids from prospective underwriters.
Notional principal amount Notional principal amount, in an interest rate swap contract, is the hypothetical, agreed-upon amount used to calculate interest payments owed to each party to the agreement. In a swap contract, the notional principal amount is not actually transferred from one party to another.
Novation Novation is the replacement of one agreement or obligation with another, where all parties to a contract agree to the change. Novation might be used to transfer an obligation to another party, or to replace an old debt with a new one.
NOW account A NOW, or negotiable order of withdrawal, account is an interest-earning, bank deposit account against which the accountholder can write drafts.
NSF An acronym for non sufficient funds. An NSF is issued by a bank when there is not enough money in the account to cover the amount of the check or transaction.
Number of free transactions per month Number of free transactions per month sets a limit on how many account transactions a depositor is allotted during a one-month period. If the accountholder requests transactions in excess of the stated amount, she will be charged an extra fee for each extra transaction. Accounts that specify a number of free transactions per month usually have lower maintenance fees relative to accounts that offer unlimited free transactions.
Nuncupative will A nuncupative will is an individual’s verbal statement describing how he would like his personal property distributed after his death. Nuncupative wills must have at least two witnesses, but are still difficult to enforce.
Nursing home A nursing home, also called a long-term care facility, is a licensed, medically-staffed residence for terminally ill or invalid individuals.

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Obligation An obligation, in general, is any binding duty or promise. In lending, an obligation is the promise to repay a financial debt. Leaving an obligation unfulfilled usually has legal consequences.
Obligor Obligor is synonymous with debtor, meaning it’s an individual or business that owes money to another party.
Offer in compromise An offer in compromise is a means of resolving back-due taxes, where the taxpayer makes one payment to the IRS that’s less than the amount of the taxes due. The IRS accepts offers in compromise only when it’s highly unlikely that the taxpayer will be able to pay off the full balance, even under an installment plan.
Offering An offering is the issuance of a security, such as stock or bond shares, for purchase by investors. If the security is being issued for the first time, the offering is called an initial public offering or IPO.
Office of Comptroller of the Currency Office of Comptroller of the Currency, or OCC, is the U.S. entity that regulates national banks and supervises federal branches of foreign banks.
Office of Federal Housing Enterprise Oversight – OFHEO The Office of Federal Housing Enterprise Oversight, or OFHEO, is the U.S. regulatory entity that supervises Fannie Mae and Freddie Mac. The OFHEO’s main task to monitor and support the financial strength of these entities, which is crucial to the strength of the U.S. mortgage industry. OFHEO is also responsible for setting conforming loan limits each year.
Office of Thrift Supervision Office of Thrift Supervision, or OTS, is a U.S. federal entity that charters and oversees savings and loan banks. The OTS conducts audits and other inspections to ensure that its member banks are in compliance with government regulations.
Offline debit card An offline debit card is a plastic card that functions like a Visa or MasterCard credit card, but pulls funds from the accountholder’s checking account. If the offline debit card carries a Visa logo, for example, it can be used at all merchants who accept Visa credit cards. The descriptor “offline” refers to how the transaction is processed; the purchase amount is not immediately processed through the linked account, but posts one to three days later.
Old Age, Survivors and Disability Insurance Program – OASDI Old Age, Survivors and Disability Insurance Program, or OASDI, is the formal name for the U.S. Social Security program. OASDI provides retirement and disability income, veteran’s pensions, and other public benefits.
On account On account describes a partial payment that’s applied to reduce a debt balance.
One year adjustable A mortgage whose annual interest rate changes yearly. The rate is chosen by the lender based on the index and margin.
One-year adjustable One-year adjustable describes a debt instrument that experiences an annual interest rate change. Most often, the term is used in reference to mortgage loans, where the interest rate is reset annually in accordance with the movement of an underlying benchmark rate.
One-Year Constant Maturity Treasury – 1-Year CMT One-year Constant Maturity Treasury, or 1-year CMT, is an index that’s published daily by the U.S. Treasury. The index value is calculated by adjusting the yields of recently auctioned U.S. Treasury bills and notes of varying maturities to the equivalent of a one-year yield.
One-Year Treasury Constant Maturity One-year Constant Maturity Treasury, or 1-year CMT, is an index that is published daily by the U.S. Treasury. The index value is calculated by adjusting the yields of recently auctioned U.S. Treasury bills and notes of varying maturities to the equivalent of a one-year yield.
Online banking Online banking is the process of viewing accounts, and requesting account transactions, by way of the Internet. Often, many of the services offered in the bank branch can be transacted online also.
Online bill payment Online bill payment is a banking service that allows customers to initiate the sending of checks to creditors via the Internet. Most online bill payment services allow the customer to store payment information so they can easily pay routine bills out of their checking accounts, without the burden of writing checks and stamping envelopes.
Online debit card An online debit card is a plastic card that functions like a Visa or MasterCard credit card, but pulls funds from the accountholder’s checking account. If the online debit card carries a Visa logo, for example, it can be used at all merchants who accept Visa credit cards. The descriptor “online” refers to how the transaction is processed; when the accountholder presents the card for purchase, the money is immediately deducted from the linked account.
On-the-spot loan An on-the-spot loan is an already approved line of credit that allows the borrower to take a draw of funds without additional approval required.
Open access Open access, also called open panel, describes a health plan that allows the insured to consult another healthcare provider in the insurance network without a referral.
Open house A means of advertising and marketing the property that is for sale. The real estate agent markets the home by inviting buyers in to see the interior and ask questions without making an appointment.
Open listing When a property is marketed by several real estate agents looking for a commission on the listed property,
Open mortgage An open mortgage is a real estate property loan that doesn’t have prepayment penalties.
Open panel Open panel, also called open access, describes a health plan that allows the insured to consult another healthcare provider in the insurance network without a referral.
Open-end credit An open-end credit is the same thing as a revolving credit line; it’s an agreement between a lender and a borrower where the borrower can borrow, pay down, and then re-borrow the funds up to an approved limit.
Open-end lease A lease agreement where the person holding the leased property is obligated to purchase the property at the end of the lease term. May also be called finance lease.
Open-end mortgage An open-end mortgage is a real estate property loan that allows the borrower to borrow, pay down, and then re-borrow funds up to an approved debt limit.
Operating lease An operating lease is an arrangement that allows the lessee to acquire and use property, but doesn’t transfer ownership rights of the property to the lessee. From an accounting standpoint, an operating lease is treated as a rental expense.
Option A legal agreement giving someone the rights to sell, buy, or lease the property under certain terms for a specific period.
Option arm Adjustable rate mortgages that offer flexibility unavailable in any other loan offer. The borrower is able to choose between loan plans that best fit their needs and financial situations. These are excellent options for people who are self employed or who work on commission because there is some flexibility on how much you pay each month.
Optionally renewable Optionally renewable describes an insurance feature that allows the insurance provider to cancel the policy at certain points in time, such as on the anniversary of the policy effective date.
Options Features that are added to the car by the dealer. These can be valuable options like a CD player, or add-ons that add no value to the car but add cash to the dealers pocket like undercoating and paint sealant.
Oral agreement An oral agreement is a binding promise or arrangement made without written documentation. From a legal perspective, an oral agreement is difficult to prove. They’re also invalid in real estate transactions.
Ordinary annuity An ordinary annuity is a series of recurring, fixed payments that continue over a specified amount of time.
Ordinary dividends Ordinary dividends are profit distributions made by a company to its shareholders. The recipient of ordinary dividends must pay taxes on the amounts received.
Ordinary income Ordinary income is a tax term that describes any income earned other than capital gains. Examples of ordinary income include wages, tips, interest income, and dividend payments.
Ordinary interest Ordinary interest, also called simple interest, is calculated under the assumption that a year has 360 days.
Ordinary shares Ordinary shares represent non-preferred ownership rights in a corporation. The owner of an ordinary share, called a shareholder, has voting rights and is entitled to dividends, but only after dividends are paid to the preferred shareholders. If the company is liquidated, ordinary shareholders don’t receive proceeds until after bondholders and preferred shareholders have been paid.
Original principal balance The amount of the original amount of money borrowed.
Origination Origination is the series of steps that leads to the funding of a mortgage loan. These steps include application, verification, loan approval, loan preparation, etc.
Origination fee It is a certain percentage of the loan charged by the lender to prepare and process the loan documents including appraisal of property, credit and cheks etc.
Origination points Origination points describe an upfront fee that a borrower pays to a mortgage lender for its role in preparing the loan for funding. Each origination point is equivalent to 1 percent of the loan amount. Origination points are set by the lender, usually based on the borrower’s qualifications, and can sometimes be negotiated.
OTS OTS, or Office of Thrift Supervision, is a U.S. federal entity that charters and oversees savings and loan banks. The OTS conducts audits and other inspections to ensure that its member banks are in compliance with government regulations.
Outpatient Outpatient is a person receiving healthcare services that doesn’t require an overnight stay.
Outstanding Outstanding describes something that’s unsettled. In lending, specifically, the term means unpaid, as in a debt balance.
Overadvance An overadvance is the funding of debt that will be used by a company to build its inventory prior to a high sales season (such as the winter holidays). Since the debt is taken prior to the expected spike in sales, the loan amount will temporarily exceed the company’s accounts receivables balance.
Overcontribution Overcontribution describes the deposit of funds into a tax-advantaged retirement account that exceeds the annual contribution limit as defined by the taxing authority. Overcontribution can sometimes result in monetary penalties.
Overdraft Overdraft occurs when drafts or withdrawals exceed an account’s available balance of funds. The term is used interchangeably with “insufficient funds.” Overdraft can also mean an immediate credit extension, such as when there are insufficient funds in an account and the bank must extend credit to cover pending drafts.
Overdraft annual cost Overdraft annual cost is the charge that a customer pays for having access to instant credit when a check written on an account exceeds the funds available in the account. If the bank pays the check, the accountholder is essentially borrowing money temporarily. This immediate credit access is an extra service for which most banks charge an annual fee.
Overdraft minimum amount Overdraft minimum amount is the smallest value that a banking institution will transfer into an account when the available balance isn’t sufficient to cover requested withdrawals. An account may, for example, have an overdraft minimum of $25. If the account balance is $100, and a check in the amount of $110 is presented for payment, the bank will advance the accountholder $25, rather than just the $10 overage.
Overdraft protection Overdraft protection is a service offered on checking accounts. When a customer has it, the banking institution will pay presented checks, even if the funds available in the account aren’t sufficient to cover the check amount. There’s usually a fee associated with overdraft protection, as well as a per-check fee, when an overdraft situation occurs.
Overlay Overlay is a comprehensive asset management style that has the goal of eliminating inefficient exposures that can occur when an investor has more separately managed accounts. The overlay system looks at the investor’s holdings holistically, across all accounts, to identify overexposures and inefficient transactions.
Overlying mortgage An overlying mortgage is a second mortgage, characterized by having a subordinate claim to the first mortgage on the same piece of real estate property.
Over-the-limit fee Over-the-limit fee is an assessment charged by a credit card company when a credit card holder exceeds his approved credit limit.
Owe To owe is to have an obligation to pay or repay.
Owner financing Purchase of property where the finance is provided in whole or part by the seller.

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P

Package mortgage A package mortgage is a loan secured by real estate property that finances the real estate and related personal property, such as furniture.
Paid Paid describes a debt obligation that’s been fulfilled.
Paid up Paid up describes a debt or obligation that’s current. In other words, all payments due have been made. The term can be used in reference to debts, credit accounts or brokerage accounts, such as when the customer must deposit funds to pay for a securities purchase.
Parallel loan A parallel loan is a loan swap transaction, where two companies operating in different countries agree to lend each other money in their respective currencies. The purpose of the arrangement is to reduce the risk of financial loss related to foreign currency fluctuations.
Paraplanning Paraplanning is the name for the administrative functions associated with financial management and planning. These functions might include preparing reports and completing paperwork. A paraplanner is one who performs these duties, much as a paralegal performs administrative tasks for attorneys.
Parking Parking is the action of placing cash into a safe but high-yield investment until it’s needed for another purpose, such as securities purchases. Parking can also refer to the illegal transfer of shares by a brokerage for the purposes of concealing undeclared short positions created when stocks were not delivered by the settlement date.
Partial release Partial release is a mortgage feature that allows some of the collateral to be removed from the collateral pool under certain conditions.
Partially amortized loan Partially amortized loan is a debt instrument that’s structured with periodic principal payments plus a balance due at maturity. For comparison purposes, if the periodic principal payments were to result in a zero balance at maturity, the loan would be called a fully amortizing loan.
Participation Participation is the act of sharing ownership in a debt facility. Lenders often split up ownership of loans with other lenders, particularly on large debt facilities, to reduce exposure.
Participation certificate Participation certificate is a share of lease revenues generated from an agreement made by a municipality. The municipality pursues this arrangement in lieu of offering a bond issue that’s supported by lease revenues, usually to avoid restrictions on debt levels. Freddie Mac, Fannie Mae, Ginnie Mae, and Sallie Mae issue and guarantee participation certificates.
Participation loan A participation loan is a debt facility that’s made by a group of lenders. Lenders often split up ownership of loans with other lenders, particularly on large debt facilities, to reduce exposure.
Passbook savings account Passbook savings account is a cash deposit arrangement with no check-writing capabilities. If covered by FDIC insurance, this type of account is considered very safe, but the yields are generally low.
Passive activity Passive activity is an endeavor which doesn’t require or receive an individual’s material participation. Owning a property rental, for example, is a passive activity. The characterization of something as a passive activity has important tax consequences; losses resulting from passive activity can’t be used to offset gains resulting from active activities.
Passive loss Passive loss is negative income resulting from a passive activity. A passive activity is an endeavor which doesn’t require or receive an individual’s material participation, such as owning a property rental. From a tax perspective, passive losses resulting from passive activity can’t be used to offset gains resulting from active activities.
Pass-through certificate A pass-through certificate is an ownership share in a pool of conforming, federally-insured mortgage loans. As payments are made on the underlying loans, they’re forwarded from the lender to the issuing agency to the certificate holders. Pass-through certificates are issued by Ginnie Mae.
Pass-through rate Pass-through rate is the yield paid to the investors of a mortgage-backed security. The pass-through rate is lower than the average interest rate paid on the underlying mortgages, because guarantee and management fees also must be paid out of the interest income generated by them.
Pass-through security A pass-through security is an ownership share in a pool of income-producing assets, such as conforming, federally insured mortgage loans. As income is generated from the underlying loans, it’s forwarded (i.e., passed through) from the lender to the issuing agency to the certificate holders.
Past-due balance method Past-due balance method is a means of determining financing charges, where interest is calculated on amounts that aren’t paid as of the due date.
Pawnbroker A pawnbroker is a businessperson who makes small loans that are collateralized by personal property. If the loan isn’t repaid, the property is sold in a retail store called a pawn shop. Jewelry, watches, and musical instruments are examples of items that would be accepted by a pawnbroker.
Pay yourself first “Pay yourself first” is a phrase referencing the personal finance strategy of saving first before paying for anything else. To implement the “pay yourself first” strategy, individuals route a designated amount of each paycheck into a savings plan as soon as the check is received. Developing this as a habit keeps the saver on track to meet future savings goals.
Payable on death – POD Payable on death, or POD, is a banking arrangement that authorizes the bank or credit union to disperse the client’s assets/deposits to a beneficiary immediately if the client passes away.
Paydown Paydown, in reference to debt, is short for paying down. It’s a payment made that reduces a debt balance.
Paydown factor Paydown factor, in mortgage-backed securities (MBS), is the ratio of one month’s worth of principal reduction divided by the original principal amount. Paydown factors are reported monthly by MBS issuers.
Payment cap The top limit on the size of the monthly payment for an adjustable rate mortgage loan.
Payment saver loan See lease-like loan.
Payment schedule This is the guidelines set forth for determining when your payment is due and how much each monthly payment will be throughout the life of your loan.
Payment shock Payment shock refers to the effect that a sudden increase in a loan’s minimum payment can have on a borrower. Many mortgage loan products are structured to have potentially large changes in the minimum payment amount. Examples include ARMs with low teaser rates, and interest-only loans that later convert to fully amortizing loans. From a lender’s perspective, payment shock is a risk, because the sudden increase could result in borrower default.
Payout phase Payout phase is the duration of time when an annuity contract makes regular, periodic income payments to the annuitant. Prior to the payout phase, the annuity is said to be in the contribution phase. Annuity payments are taxable income.
Payroll card A payroll card is a plastic pay card, similar to a debit card, that’s funded by wage income. Instead of passing out paychecks, the employer funds each employee’s card electronically.   Employees can then access their funds at ATM machines.
Payroll tax Payroll tax is the amount of funds withheld by an employer from an employee’s paycheck, to cover federal, state, and local income taxes. Amounts withheld for specific types of taxes are usually itemized on the payroll stub. After the close of the tax year, the employee must fill out a tax return to determine if the payroll taxes withheld were enough to cover taxes owed.
Payroll taxes Payroll taxes are amounts withheld by an employer from an employee’s paycheck, to cover federal, state, and local income taxes. Amounts withheld for specific types of taxes are usually itemized on the payroll stub. After the close of the tax year, the employee must fill out a tax return to determine if the payroll taxes withheld were enough to cover taxes owed.
PC banking PC banking is a service that provides individual and business customers with access to their banking records from a personal computer.
Pell grant The largest federal grant program. These are awarded based on need and given to families whose incomes are less than 30,000 a year.
Penalty A penalty is a punishment incurred by the failure to follow a rule. In taxes, the IRS charges penalties to those who don’t pay their taxes on time. In personal finance, credit card companies charge penalties to those who remit their payments late.
Penalty rate Penalty rate, in lending, is a higher interest rate that goes into effect in default situations. Credit card agreements, for example, state the penalty rate (or default rate) value, along with the conditions that would cause the penalty rate to be triggered. Penalty rates can be several percentage points higher than the regular rate.
Pension fund A pension fund is a program initiated by an employer to manage monies set aside for employee retirement. Monies deposited into the fund are invested for growth, so that the asset pool can support pension payments made to employees once they retire. Contributions come from employers and employees, and the management of the funds is usually outsourced to a third party.
Pension plan A pension plan is a program initiated by an employer to manage monies set aside for employee retirement. Monies deposited into the plan are invested for growth, so that the asset pool can support pension payments made to employees once they retire. Contributions come from employers and employees, and the management of the funds is usually outsourced to a third party.
Pension shortfall A pension shortfall occurs when a company’s pension fund doesn’t have sufficient funds to meet expected future payment obligations. This can happen in defined-benefit plans, which place the risk of investment returns on the company rather than   the employee. If investments underperform, the plan won’t have the liquidity available to meet its defined-benefit obligations. In a pension shortfall situation, the company must make additional deposits into the fund. Pension deposits are an expense to the company.
Per diem interest The amount of interest calculated per day.
Per item charge Per item charge is an assessment incurred by a banking customer who has exceeded the number of free transactions allowed for his account. If the account allows up to 25 transactions per month, the customer will have to pay the per item charge for every transaction after the 25th one.
Per-diem interest Per-diem interest is one day’s worth of interest on a debt. Since interest rates are based on a period of one year, per-diem interest is calculated by extrapolation. The total annual interest expense is calculated based on the rate, and then that figured is divided by 360 or 365 (for ordinary and exact interest, respectively) to calculate per-diem interest. Per-diem interest is used to calculate the first month’s interest when a loan funds on a day other than the first of the month.
Periodic cap A protective measure for consumers that limits the maximum amount the interest rate on an adjustable rate mortgage can change in a time interval, usually 6-12 months.
Periodic interest rate Periodic interest rate is a loan’s rate of interest, converted to be applicable to a time period other than one year. Interest rates are normally based on one year, but sometimes it’s useful to know the rate to be charged over one week, one month or one quarter. These are periodic rates, and they’re determined by extrapolation. If the rate on a loan is 10 percent, the periodic rate used to calculate one quarter’s interest is 2.5 percent.
Periodic rate Periodic rate is a loan’s rate of interest, converted to be applicable to a time period other than one year. Interest rates are normally based on one year, but sometimes it’s useful to know the rate to be charged over one week, one month, or one quarter. These are periodic rates, and they’re determined by extrapolation. If the rate on a loan is 10 percent, for example, the periodic rate used to calculate one quarter’s interest is 2.5 percent.
Periodic rate cap A periodic rate cap is a limitation on how much an interest rate can be adjusted from one period to the next. Periodic rate caps are important to holders of adjustable-rate mortgages (ARMs); higher caps increase the possibility that the loan payments will rise beyond affordability at one adjustment.
Perkins loan These need-based loans are funded by both the government and the college. Benefits of these loans include no interest while the student is in college and a nine month grace period upon graduation.
Permanent life insurance Permanent life insurance is a category of life insurance programs that offers a death benefit plus a tax-advantaged retirement investment account. Growth of funds in the investment account usually doesn’t incur income tax liabilities. Permanent life insurance is considered an open-ended policy, in that the policy remains in force indefinitely and doesn’t have to be renewed.
Permanent loan A long term mortgage ranging anywhere from 10 to 30 years. Sometimes called an end loan.
Personal Equity Plan – PEP Personal equity plan, or PEP, is a type of investment plan that used to be available to U.K. citizens. PEPs encouraged investments by offering tax-free income and capital gains. PEPs were discontinued in the 1990s and replaced with Individual Savings Accounts.
Personal finance Personal finance is a general term that refers to the strategies and practices of managing an individual’s or household’s money. Personal finance encompasses saving, budgeting, investing, etc.
Personal finance manager A personal finance manager is a software program that helps individuals and households manage their money. Personal finance managers may have account registers, as well as budgeting and investment tools. Many also allow for data sharing with major banking and investment institutions.
Personal guarantee A personal guarantee is an individual’s agreement with a lender to repay the debts of a business. Loans made to start-up businesses require personal guarantees. As businesses become more established, the personal guarantee requirement will become a point of negotiation between the corporate officers and the lender.
Personal identification number A personal identification number, or PIN, is a confidential password needed to access personal banking information at ATM machines, and to conduct purchase transactions using a debit card.
Personal income Personal income is the total of an individual’s gross earned, investment and passive business income.
Personal injury protection Personal injury protection, or PIP, is an optional set of benefits available on an auto insurance policy. PIP pays medical expenses resulting from an auto accident.
Personal interest Personal interest is interest charged on personal loans and credit card accounts. Personal interest is not tax-deductible.
Personal loan Money borrowed from a lender where property is not used as collateral. The rates are higher, like credit cards, and are generally smaller denominations over a two year period.
Personal property Personal property, also known as chattel, is any owned property that isn’t permanently attached to one location. Any property other than real estate is usually regarded as personal property. Most lenders will not place liens on personal property, because the risk is much higher that the borrower can flee and take the property with him.
Personal property liability Personal property liability is a type of automobile insurance coverage that pays for damages to another party’s car or property when you’re at fault.
Personal property taxes Personal property taxes are assessments charged to owners of certain types of movable property (property other than real estate). Most commonly, personal property taxes are assessed by states and local governments on things like cars, motorcycles, boats, recreational vehicles, airplanes, campers, etc.
Personal use property Personal use property is chattel that’s owned for personal enjoyment rather than business or investment purposes. The distinction is important because losses associated with personal use property may not be tax-deductible.
Philanthropy Philanthropy is the practice of supporting the well-being of the human race. It’s usually associated with giving donations to charitable organizations that pursue humanitarian objectives.
Phishing Phishing is a scam that’s designed to lure consumers into voluntarily providing confidential information. The consumer will receive an email that appears to be from a bank or online service provider (such as PayPal). The email will explain that the consumer needs to update account information or remedy an account problem. A link will be provided where the consumer can sign on and perform the requested tasks. The link directs the consumer to a phony website, where the confidential information provided by the consumer is recorded.
Pick-up tax Pick-up tax is a state-imposed assessment that’s based on the federal estate tax. Pick-up taxes are used by states that don’t have their own estate tax legislation; rather than developing separate legislation, these states collect estate taxes by “picking up” an amount derived from the estate’s federal tax liability.
Piggyback loan A piggyback loan is a second mortgage that’s taken out to avoid mortgage insurance. Mortgage insurance is typically required on mortgages that finance more than 80 percent of the home’s purchase price. A homebuyer who doesn’t have a 20 percent cash down payment can fund a first mortgage for 80 percent and use a piggyback loan to cover the remainder of the purchase price.
Piggyback mortgage A type of second mortgage typically used to avoid paying for mortgage insurance, which is required on mortgages with less than 20 percent down.   The borrower takes out a primary mortgage for 80 percent of the purchase price and then a second “piggyback” mortgage to cover all or part of the down payment.
PIN An Acronym for Personal Identification Number. This number is used to access bank accounts at ATM’s or sometimes online and should be kept a secret.
PIP PIP, also called personal injury protection, is an optional coverage available on auto insurance policies that pays the medical expenses incurred by you and your passengers that result from a qualified accident.
PITI These are the four components of the monthly payments to the lender, i.e. the principle, interest, taxes and insurance. Debt to income ratio is calculated by the lender from this amount. Sometimes mortgage insurance is also included in an impounded loan.
PITI reserves An amount of cash that a homebuyer must have on hand after all of the closing costs and down payments have been made. This amount is generally equal to a specified amount of mortgage payments including principal, taxes, and insurance.
Planned unit development (PUD) A type of ownership where a unit or the whole building is owned by an individual who lives in it and where the ownership of common spaces is shared by other members of the homeowner’s association for the benefit of all owners.
Planned urban development – PUD Planned urban development, or PUD, is a zoning class that allows for residential and commercial buildings. The PUD classification allows builders to develop residential, retail, and professional buildings into one community, so that residents can live, work, and play locally.
Plat A map showing the way a parcel of land has been divided into individual lots. This map will also show the streets and easements.
Pledged asset Pledged asset is property that secures debt and remains in possession of the lender until the debt requirements have been met. While the asset owner/borrower has to transfer the pledged asset to the lender, the lender has no ownership rights to the pledged asset unless the borrower defaults.
Pledging Pledging is the process of providing assets to a lender for use as loan collateral. Pledged assets are held by the lender until all debt conditions have been met, but the lender doesn’t own those assets unless the borrower defaults.
PLUS loan Loans that are not need based that the parents of the student may take out. These loans are offered by the college and the government and are determined by the FAFSA.
PMI PMI, or private mortgage insurance, is coverage that protects the lender from costs associated with foreclosing on a mortgage loan. Lenders require PMI coverage when the mortgage loan finances more than 80 percent of the property’s value. PMI premiums are paid by the borrower.
Point Point is short for percentage point. In bonds, the term is used in reference to changes in interest rates; a rate that changes from 8 percent to 9 percent is said to have moved up 1 point. In real estate lending, a point is an upfront fee equal to 1 percent of the loan amount. Point can also refer to value changes in stocks and stock indices, even though these aren’t percentage figures. For example, if the Dow Jones Industrial Average rises from 12,200 to 12,325, it is said to have increased 125 points.
Point-of-sale Point-of-sale is the location, physical or virtual, where sales are made. In a retail store, the point-of-sale is the cash register area where consumers pay for goods. For an Internet retailer, the point-of-sale is the interface that accepts the consumer’s payment information.
Point-of-service plan Point-of-service plan, also called POS, is a type of healthcare coverage that allows insureds to choose in-plan care (like an HMO) or out-of-plan care (like a PPO). Insureds can save on out-of-pocket costs by using in-plan care providers, but they still have the option to choose the provider they want to see.
Points One point equals one percent of a mortgage. There are origination points and discount points. Origination points help cover the loan expenses for the lender and discount points help borrowers by reducing interest rates.
Points (time share) Points (time share) are credits that can be used in exchange for use rights at properties within a time share network. Time share properties that use the points system assign a certain number of points to an owner’s use rights, based on the length and frequency of the stay. If the owner wishes to stay at another property in the network, he can trade in his points at his home property and receive a stay of an equivalent point value at the other property.
Points-based vacation plans Points-based vacation plans are time share ownership arrangements, where use rights are given a point value based on length of the stay and size of the unit, etc. Properties form networks so that points can be used at any resort within the network.
Policy (insurance) Policy (insurance) is the documentation that explains the rights and obligations of an insured and insurance provider. Specifically, the policy will state coverages, exclusions, and premiums.
Policy loan A policy loan is a debt secured by the cash value of a life insurance policy. If the borrower doesn’t pay back the debt, the policy death benefit can be reduced by the unpaid amount.
Pool factor Pool factor is a reported figure that represents the percentage of principal still outstanding in a mortgage-backed security issued by either Freddie Mac, Fannie Mae, or Ginnie Mae. As principal payments are received on the underlying mortgages, they’re passed through to investors. At any given time, the pool factor represents the mortgage principal that hasn’t yet been repaid.
Pooled income fund Pooled income fund is a mutual fund that invests financial gifts and distributes the income to fund participants and beneficiaries. The participants are the donors and the beneficiaries are the gift recipients. A pooled income fund provides tax advantages to the participant in the year the fund is created. The fund is structured to make income payments to the participant until death. After the participant’s death, ownership of the assets are transferred to the beneficiary.
Pop-up option Pop-up option is an optional feature on a pension plan that allows the retiree to continue receiving the full pension amount if the spouse dies before the retiree. Without the pop-up option, the retiree would receive a lesser, “survivor” amount once the spouse passes.
Portability Portability is the quality of being movable; in reference to employee benefit plans, portability is the ability of benefit plans to stay with the employee through a job change. The Consolidated Omnibus Budget Reconciliation Act, or COBRA, for example, allows employees to stay on their former employer’s health plan for up to 18 months.
Portfolio lender A portfolio lender is a financial institution that makes loans and keeps them in-house until they’re paid off, rather than selling them to investors on the secondary market. The portfolio lender typically offers deposit services as well, and uses the deposits as a source of liquidity. Profits are generated by charging more on loans than paying out on deposits.
Portfolio runoff Portfolio runoff is the reduction of outstanding mortgage principal (due to prepayments) within a mortgage-back security (MBS) portfolio. If interest rates change significantly, homeowners are inclined to refinance at the lower market rates. When they do, the MBS portfolio and its expected income over time are both reduced.
POS POS, or point-of-sale, is the location where retail sales are transacted. In a retail location, this is the area near the cash registers. In an Internet store, the POS is the interface that accepts the consumer’s payment information.
Positive carry Positive carry describes a situation where two related cash flow positions net out to a positive number, thus creating a profit. A simple example would be borrowing money at 8 percent, and investing it to return 10 percent. The 2 percent difference is your profit.
Positive yield curve Positive yield curve describes the economic environment in which, for two comparable interest-bearing investments, long-term yields are higher than short-term yields. This situation indicates that interest rates are expected to go up in the future.
Possession When all of the paperwork is complete and the closing arrangements are finalized, the owner is given keys to the house.
Postnuptial agreement A postnuptial agreement is a legal arrangement between a husband and wife that specifies how their property is to be distributed in a death or divorce. Normally, both husband and wife must retain separate legal representation.
Pour-over will A pour-over will is a legal document that expresses an individual’s desire to have all of his assets placed in a pre-existing trust upon his death. The trust itself is the primary vehicle for distribution of the estate’s assets, but the pour-over will provides an added mechanism for directing the asset distribution.
Power of attorney A legal document that authorizes one person to act on behalf of another. There can be a General POA granting compete authority or a specific POA for a specific act or for a certain period of time.
PPO A PPO is a type of healthcare coverage that combines the characteristics of fee-for-service and HMO plans. The insured has the option to choose healthcare providers, but receives more expansive coverage when visiting providers are approved by the plan.
Pre-admission authorization Pre-admission authorization is permission to begin an in-patient stay or procedure, provided to an insured by an insurance provider. In some healthcare policies, the insured must receive pre-admission authorization or coverage won’t be provided.
Pre-approval This term denotes that the borrower gets his home loan application with debt, income and savings proof reviewed and approved by an underwriter before finalizing any property. The pre-approval is done taking into account certain loan amount and estimating the interest rates and property taxes, insurance etc. at the time of taking the loan. It applies only to the borrowe, but once the property is chosen, it should also meet the underwriting guidelines of the lender.
Pre-approval letter The official letter stating how much money a borrower is qualified for based on interest rates and credit history.
Preapproval letter (mortgage) A preapproval letter (mortgage) is a document produced by a mortgage lender or broker that provides an estimate of how much an individual would be able to borrow in the current interest rate environment. A preapproval letter can be submitted with an offer to make the seller feel more comfortable about the buyer’s prospect of obtaining financing.
Pre-approved Pre-approved describes credit card offers that result from cursory credit screenings. An individual who receives a pre-approved offer isn’t guaranteed to receive the credit card account. If, for example, the individual states his income as zero, the card application is likely to be declined, regardless of the pre-approved status.
Pre-computed loan A pre-computed loan is a type of auto loan facility. It’s structured with a standard amortization table, such that the total interest is determined before the loan is funded. This total interest is added to the loan amount, and your payments are applied to the combined balance. When a borrower agrees to a pre-computed loan, he’s agreeing to pay back the total interest and principal, even if the loan is paid off early.
Predatory lending Predatory lending describes the practice of dishonest or unethical conduct by loan brokers and lenders for the purposes of persuading borrowers to take inappropriate, over-priced loans. The federal government and some state governments have laws prohibiting predatory lending.
Pre-existing condition A pre-existing condition is known health ailment that came into being before the execution of an insurance contract. The insurance provider will usually exclude coverage related to the pre-existing condition, either temporarily or permanently.
Preferred debt Preferred debt is an amount owed that has repayment priority over another debt. In reference to mortgages, for example, a first mortgage has a higher lien position than a second mortgage. Of the two loans, therefore, the first mortgage is the preferred debt.
Preferred provider organization A preferred provider organization, or PPO, is a type of healthcare coverage that allows the insured to select from lower-cost, network providers and higher-cost, out-of-network providers. Coverage applied to in-network healthcare is generally more expansive and costs less than coverage applied to out-of-network care.
Preforeclosure sale Preforeclosure sale is a property sale that takes place in lieu of foreclosure, where the money raised by the sale is used to pay off the debt. In many cases, the funds raised are less than the amount owed and the lender must write-off the difference. Preforeclosure sales can only proceed with approval from both the borrower and the lender.
Pre-foreclosure sale When the borrower sells the property for less that what is owed on the loan to avoid foreclosure. This sale will fulfill the borrower’s debt.
Premature distribution A premature distribution is a taxable, penalized withdrawal made from a tax-advantaged retirement plan. An example of a premature distribution is the removal of funds from an IRA before the accountholder reaches the age of 59 1/2. This type of withdrawal is subject to a 10 percent penalty.
Premium A premium is the cost of an insurance policy. Premium can also mean the amount paid for something over and above its stated value. A concert-goer, for example, would probably pay a premium for front row seats.
Prenuptial agreement A prenuptial agreement a legal arrangement between a man and woman who intend to marry. The agreement specifies how their property is to be distributed in the event of divorce. The prenuptial agreement can also outline each person’s rights and responsibilities while the marriage is in force.
Prepaid expenses or prepaid items or prepaids Prepaid expenses, prepaid items or prepaids are business balance sheet assets that are created when goods and services are paid for in advance. Consider, for example, a business that pays its insurance premiums in December for policies that are in force for the following calendar year. Rather than account for this transaction as an expense in December, the premium amount is held in a balance sheet account (called prepaid expenses). and expensed periodically throughout the following year. Doing so matches the expense with the timing of the benefit received.
Prepaid interest As a way to save on taxes, a borrower can pay interest before it is due.
Prepaid tuition plans An option that lets potential and future parents pay for a semester of college today which will lock in the current interest rate for the future educations regardless of the year and tuition increases.
Preparation charges An additional way for a car dealer to make money by convincing the buyer that they need to pay for prep charges which have already been paid by the manufacturer in order to get the car ready for sale.
Prepayment A full or partial payment of the principal amount of the loan before due date.
Prepayment penalty A penalty or fee charged for payment of the loan amount before the due date.
Prepayment plan A prepayment plan is a mortgage payment plan that’s managed by a third party. The mortgage borrower makes biweekly payments to the third party, which then funds the borrower’s required monthly payment. After one year, the borrower will have made 26 half-payments, which amounts to 13 total payments to the third party. Over the same time period, the mortgage lender will only require 12 payments due. The third party sends the lender the additional amount as an extra principal payment. Over time, this dramatically reduces the mortgage interest costs, and shortens the length of the loan.
Prepayment privilege Prepayment privilege is a debt option that allows the borrower to pay off the debt before maturity.
Prepayment risk Prepayment risk is the risk of suffering lost income on a fixed-income security due to early payoff of the outstanding debt. On a mortgage-backed security (MBS), for example, the underlying mortgage borrowers may refinance their mortgages if markets rates go down significantly. When this happens, the income-producing asset pool of mortgage loans is reduced; investors, therefore, ultimately receive a lower yield on their investment. Some securities are structured with protections against prepayment risk.
Prepayment speed Prepayment speed is an estimate for how quickly mortgage borrowers in a securitized pool of mortgage loans will refinance or repay their mortgages. Prepayment speed is an indication of prepayment risk associated with a particular issue of mortgage-backed securities (MBS). Investors look at prepayment speed when judging the value of a particular MBS investment.
Prequalification Prequalification is the process of estimating how much a prospective homebuyer can borrow based on current interest rates and the borrower’s stated income. Prequalification doesn’t represent a binding loan approval.
Pre-qualification Information given to the loan officer about the borrowers position on his debt, income and savings before granting of a loan. The loan officer may or may not ask for the borrower’s credit report.
Pre-sold home A home which is sold before it is built.
Previous balance Previous balance, in an open-ended credit arrangement, is the amount of revolving debt outstanding at the beginning of a billing cycle. Some credit agreements calculate interest on the previous balance amount, which results in higher interest costs to the borrower.
Previous balance method Previous balance method is a means of calculating interest charges on a revolving credit account, such as a credit card. The interest rate is applied to the entire amount outstanding at the start of the billing cycle, regardless of whether any of this balance was paid down during the billing cycle. The previous balance method usually results in higher interest charges than other methods.
Primary care network Primary care network is a group of healthcare professionals who provide healthcare services to a defined set of insured individuals. These providers are the first point of contact when an insured is in need of healthcare services. The insurance plan creates and defines the primary care network.
Primary mortgage market The primary mortgage market is the industry that originates mortgage loans, inclusive of mortgage lenders, brokers, and borrowers. The primary functions associated with originating mortgage loans are differentiated from the activities in the secondary mortgage market, where funded mortgage loans are bought and sold as investments.
Prime Prime describes the best-qualified borrower, as in: “Only prime borrowers will qualify for this low rate.” The term is related to the prime rate, which is a base lending rate reserved for the most creditworthy borrowers.
Prime accounts Prime accounts are accounts receivable that are high enough quality to be included as collateral for a business loan. The loan agreement will provide an exact definition of prime accounts, but generally, they have to be current and held by creditworthy customers. Prime accounts are also called eligible accounts.
Prime bank Prime bank, in proper usage, describes a large, reputable international bank. In more common usage, however, the term is used by con artists when scamming investors out of money. The SEC has published warnings to consumers and investors to be cautious about dealing with anyone who describes high yield investment programs backed by a prime bank. Often, these investment programs are fictitious, and the investors lose their money.
Prime conforming Prime conforming describes a mortgage loan made to a well-qualified borrower in an amount that’s within the conforming limits set by the Office of Federal Housing Enterprise Oversight (OFHEO). Prime refers to the borrower’s creditworthiness; conforming refers to the conservative loan size and structure, which makes the loan eligible for resale to, or guarantee by, Fannie Mae and Freddie Mac.
Prime for life Prime for life is a line of credit whose interest rate is the prime rate with no margin. Since the prime rate is a variable value, a prime for life loan is a variable-rate instrument. Only the most creditworthy borrowers normally qualify for a prime for life debt.
Prime rate The interest rate that a bank charges its most reliable customers who are the least likely to default on their loan.
Principal The actual value of a mortgage or note borrowed or the balance left of a loan not taking into account any interest.
Principal amount Principal amount is the loan amount at funding, and the amount that has to be repaid when the loan matures, excluding interest and debt charges.
Principal balance Principal balance is the amount owed on a debt. At funding, the principal balance is the loan amount. If payments have been made on the debt, the principal balance is the remaining, unpaid amount.
Principal residence Principal residence is the place where one lives most of the time. The distinction between a principal residence and secondary property is important when determining tax liability on any gains earned by selling the property.
Principal risk Principal risk is the danger of losing invested funds due to bankruptcy or default. Before an investor buys an equity share in a company, for example, she must assess the probability that the company will become insolvent and be unable to return her investment.
Principal, interest, taxes, insurance – PITI Principal, interest, taxes, insurance, or PITI, are the different parts of a complete mortgage payment. Principal is the amount applied to the debt balance, interest is the monthly accrued financing charges, taxes are pro-rated amounts applied to the annual tax bill, and insurance is the mortgage insurance premium.
Principle of conformity The idea that a house will garner a fair price if it is located near houses of similar size and condition.
Principle of progression When a piece of real estate which is of lower value can command a higher price due to its location and proximity to higher end properties.
Principle of regression The opposite of progression. When a high end property’s value is brought down by its location and proximity to lower end properties.
Prior redemption privilege Prior redemption privilege is synonymous with prepayment privilege; it’s a borrower’s contractual right to pay off debt early without penalty. A borrower would choose to do so if interest rates drop such that refinancing the debt would result in lower interest charges.
Prioritization of debt Prioritization of debt is the placement of amounts owed in primary, secondary, and tertiary positions. Primary debt is the first to be repaid if the borrower becomes insolvent and must liquidate assets to pay off creditors.
Private annuity Private annuity is an annuity contract made between two parties, neither of which is an insurance company in the business of selling annuities. An annuity is an arrangement whereby one party pays a fee, or transfers assets to another party in exchange for a guaranteed stream of income payments. There may be certain tax benefits associated with setting up a private annuity as a means of transferring assets to a family member.
Private banking Private banking refers to the expanded set of services financial institutions offer to their wealthy customers. These services might include financial and estate planning, investment management, etc. Customers must meet minimum deposit requirements to have access to private banking services.
Private college/university A private college/university is an institution of higher learning that doesn’t receive public funds. These colleges and universities are usually characterized by higher tuition rates, smaller classes and, sometimes, more specialized programs.
Private debt Private debt is an economic term referring to the total money owed by individuals and businesses within a country.
Private investment fund A private investment fund is a company that issues securities to an exclusive group of investors, and is exempt from certain SEC regulations. To be considered an exempt, private investment fund, the entity must have fewer than 100 investors, or its investors must have large amounts of money invested in other places. The exemption from SEC regulation provides private investment funds with an added level of flexibility in pursuing specialized investments.
Private label cards Private label cards are credit accounts issued by retailers. Department stores commonly offer private label cards, which can only be used at that store. They’re called private label because the retailer partners with a card issuer to have the capability of offering a credit card that carries the retailer’s brand name and logo.
Private mortgage insurance (PMI) It serves to protect lenders against defaults or losses from borrowers. Borrowers are required to carry Private Mortgage Insurance if their loan has loan-to-value higher than 80 percent. Depending on the type of loan the borrower will have to pay an initial premium and a monthly premium.
Probate Probate is the process of establishing a will’s legal validity.
Probate sale Upon the death of the owner, the sale of the property as supervised by the court. The proceeds are divided upon the heirs and creditors.
Proceeds Proceeds are monies which result from transactions. In real estate, for example, the proceeds from a property sale are the funds generated by that sale. In lending, the proceeds of a loan are the monies funded by the loan.
Production home Homes that are mass produced by one builder or developer.
Profile A profile, in general, is a summary of data, such as the set of information kept on file for customers, vendors, students, employees, etc.
Progressive tax Progressive tax is an assessment that’s charged at a higher rate to higher-income individuals. Income taxes are usually progressive.
Projected maturity date Projected maturity date is an estimate of the date on which an obligation will be fulfilled. In collateralized mortgage obligations (CMOs), the projected maturity date is the date the final payment is expected to be made.
Promissory note A written agreement to repay a loan.
Proof of claim A proof of claim is a written filing made by a creditor during bankruptcy proceedings, which describes the nature of the debtor’s obligation to the creditor.
Property Property is something owned. There are several types of property, such as personal, real estate, and intangible. Personal property includes movable objects, such as boats, cars, clothes and jewelry. Real estate property is land. Intangible property includes patents and trademarks.
Property report A property report is a compilation of data on undeveloped land that’s filed with the U.S. Housing and Urban Development’s Office of Interstate Land Sales Registration.
Property tax A tax assessed by the state or local government on real estate and personal property whose amount varies depending on the property’s value and the various services provided to the property. Property taxes are most often paid into an escrow account and the lender is responsible for paying the taxes when it is due.
Property tax deduction An expense on a home loan that the federal government allows homeowners to deduct from their income before computing their income tax
Property value How much a piece of real estate is worth based on the price a buyer and seller would negotiate.
Proportional tax Proportional tax is an assessment system that calculates taxes at the same rate for all individuals within the tax jurisdiction. The U.S. and Canada do not use proportional taxes.
Proprietary lease A proprietary lease is a property use arrangement provided by a corporation to a co-op owner. When an individual buys into a co-op building, the ownership arrangement gives the owner a certain number of shares in the co-op, along with a proprietary lease for one of the residences in the building.
Prorate An agreement on how the property taxes are paid and handled depending on when the title changed hands.
Prudent-Person Rule The Prudent-Person Rule is a legal concept that seeks to protect investors from advisors who employ risky investment strategies on behalf of their customers. Investment advisors are required to act with discretion and limit investment choices to securities that a reasonable or prudent person would buy for her own portfolio.
Public college/university Public college/university is an institution of higher learning that’s partially funded by the state. Public colleges and universities generally have much lower tuition rates, and are therefore more accessible to the general population.
Public record Public record is a general term for legal documentation or property ownership information that’s kept available for public review. Court records and certain documents pertaining to real estate transactions are often part of the public record.
Public Securities Association Standard Prepayment Model – PSA Public Securities Association Standard Prepayment Model, or PSA, is a method of quantifying and planning for prepayment risk associated with a pool of mortgage loans backing a security issue. The model assumes that the rate of prepayments will gradually rise over the life of the mortgage loans.
Punch list A punch list is an account of items that need to be addressed. In construction projects, punch lists are used to document unfinished items or items that need repair. Punch lists can also be used to document repairs that need to be made before a property sale is finalized.
Punitive rate Punitive rate is a high interest rate charged by credit card issuers to accounts that are in bad standing. Punitive rate may also be called default rate, and may result from missed payments, or charges that are in excess of the credit line.
Purchase agreement A contract in which the buyer and seller approve the price and other terms of the transfer of title. This contract is required when you apply for the loan. Also called an agreement of sale, a purchase contract or a sale contract.
Purchase contract See Purchase agreement.
Purchase mortgage market The purchase mortgage market is the portion of the mortgage origination industry that deals with home purchases, and doesn’t include refinance mortgages.
Purchase option A real estate agreement under which a portion of monthly rent may be used toward eventual purchase of the property. For automobiles, the portion of a lease agreement that establishes the amount the lease holder can pay in order to purchase the car when the lease terms are complete. The price is usually the residual value.
Purchase-money mortgage A home loan that a borrower obtains to buy property and uses the property as collateral for the loan.
Pure lease Pure lease, also called a true lease, is an arrangement between a lessor and lessee that doesn’t allow the lessee with the option to purchase the leased property or renew the lease term. Pure leases are usually used for short-term equipment financing.
Purpose loan A purpose loan is a debt instrument that’s collateralized by security holdings and used to finance the purchase of additional security positions. Purpose loans are subject to Federal Reserve Board restrictions and margin requirements.

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Qualified adoption expenses Qualified adoption expenses are costs associated with adopting a child for which the IRS provides a tax credit. Qualified expenses include things like attorney fees and adoption agency fees. Fees incurred while adopting a spouse’s child do not qualify for the tax credit.
Qualified disclaimer Qualified disclaimer, in the U.S., is a legal refusal to accept an ownership interest in property, usually for the purposes of avoiding an estate tax liability. Qualified disclaimers are governed by restrictions and requirements as set forth in the IRS Tax Reform Act of 1976.
Qualified dividend A qualified dividend is a profit distribution to shareholders that can be taxed as a capital gain. This tax treatment is advantageous to the taxpayer since tax rates on capital gains are usually lower than income tax rates.
Qualified Medicare Beneficiary Qualified Medicare Beneficiary, or QMB, is a program that covers certain Medicare deductibles including the Part A hospital deductible and the annual Part B deductible. The QMB program was established by the Medicare Catastrophic Coverage Act of 1988.
Qualified retirement plan A qualified retirement plan, in the U.S., is an employer-established retirement savings program that meets IRS requirements, and therefore receives certain tax advantages. Pension programs, profit-sharing plans, and 401(k)s are qualified retirement plans.
Qualified Terminable Interest Property (QTIP) Trust Qualified Terminable Interest Property Trust, also called a QTIP trust, is an estate planning tool that allows assets to be transferred from one spouse (the trust grantor) to another. Assets are transferred into the trust, and income from those assets can be directed to the spouse. If the trust grantor dies first, this arrangement makes the trust assets inaccessible to anyone else, should the surviving spouse remarry.
Qualified tuition plans (QTP) These plans are known as 529 plans and include both prepaid tuition plans and college savings plans.
Qualifying investment A qualifying investment is an investment that can be made with pretax money because it fulfills stated requirements of the taxing authority. Examples include funds invested in qualified retirement plans and college savings plans.
Qualifying ratios This is a ratio of all fixed monthly expenses including PITI and other costs like students’ loans, credit card payments and car loans to the total monthly income. This is calculated to determine the borrowers capacity.
Qualifying widow/er Qualifying widow/er is a tax filing status that can be used by an individual for two years following the death of a spouse. Qualifying widow/er status allows the surviving spouse to be taxed with the rates that apply to those who are married, filing jointly. To qualify for this status, the individual must not be remarried, and must have a dependent child living in the home.
Quick assets Quick assets are items of value that can be easily converted to cash. These include short-term investments and accounts receivable.
Quick ratio Quick ratio is the quotient of cash plus accounts receivable, divided by current liabilities. The ratio, also called the acid-test ratio, is used to assess a company’s ability to meet its short-term obligations. A higher quick ratio means the company is more capable of meeting upcoming payment obligations with cash and accounts receivable.
Quitclaim deed The document that transfers the ownership of a title to property and is filed with the government. It often is used among family members and can be used to clear up a gap in the chain of title or inheritance questions.

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Rabbi Trust A Rabbi trust, also called a grantor trust, is a legal entity created by an employer to provide for non-qualified employee benefits. The name comes from the first IRS ruling on the subject, which involved a synagogue.
Radon gas Radon is a cancer-causing, radioactive gas that kills 21,000 Americans a year, according to the U.S. Environmental Protection Agency. Some states’ real estate laws require a seller to inform potential buyers when it is present.
Rain check A rain check is the promise by a business to a customer that a sold out sale item can be purchased at some later date for the discounted price. A rain check can also be a ticket entitling a person to a replacement event, when the original event is rained out.
RAL RAL stands for refund anticipation loan; it’s a short-term loan offered to a taxpayer who’s expecting a tax refund. The borrowed funds are repaid when the tax refund arrives.
Rate The percentage of interest a borrower pays for the use of money.
Rate after intro The interest rate that will apply to the line of credit after the promotional or introductory period is over.
Rate and term refinance Rate and term refinance is the restructure of a mortgage loan that involves changing the interest rate and maturity length of the loan. The loan amount doesn’t change with a rate and term refinance. These mortgage loans are often less expensive than cash-out refinances, which are made in amounts larger than the original mortgages.
Rate improvement mortgage A mortgage with a one time interest rate cut that allows a borrower to save money on his mortgage without paying a refinancing charge.
Rate index This index is used to determine the interest changes on an adjustable rate mortgages and variable rate loans. It is expressed in a table format and quotes the yields that are being paid on debts like Treasury Bills and bank deposits.
Rate lock A commitment guaranteed by a lender that an interest rate will not change on a quoted mortgage for a specific period of time.
Rate shopping Rate shopping is the process of applying for a loan with more than one lender, in an effort to find the most attractive terms.
Rate-improvement Rate-improvement is a provision included in some fixed-rate mortgages; it allows the borrower to reduce the loan’s interest rate one time during the loan’s life. Without this provision, such a rate change would require a refinance.
Rate-improvement mortgage Rate-improvement mortgage is a fixed-rate, real estate loan that includes a rate-improvement option. The rate-improvement provision allows the borrower to reduce the loan’s interest rate one time during the loan’s life. Without this provision, such a rate change would require a refinance.
Rating A rating, in finance, is an assessment of the financial strength of a person, business, or debt issue. Credit ratings are used for people and businesses, stock ratings are used for equities, and bond ratings are used for commercial and municipal debt.
Reaffirmation agreement An agreement by someone involved in a Chapter 7 bankruptcy to continue paying a debt after the bankruptcy. This is typically used to keep a car from being repossessed during bankruptcy.
Real asset A real asset is property that has value based on its utility. Land and equipment are real assets, but securities holdings are not.
Real estate Real estate is land. Most of the time, the ownership of land includes ownership of the buildings and resources located on that land.
Real estate agent A licensed person who negotiates a real estate transaction and represents either the buyer or the seller.
Real estate attorney A lawyer who specializes in real estate title transfers and property tax issues.
Real estate broker A broker is similar to an agent but often has agents working under them and takes a percentage of the agent’s commission in exchange for office space and overhead. The broker will also represent a buyer or seller in a real estate sale.
Real estate bubble A rapid increase in the prices of homes followed by a steep drop off.
Real estate investment group A real estate investment group is an organization that purchases a portfolio of properties that are resold in shares to investors. The group manages the tenants and property maintenance in return for a percentage of rent proceeds.
Real estate investment trust Referred to as a REIT. This trust invests primarily in real estate and passes the income and losses onto the investors.
Real Estate Investment Trust – REIT A Real Estate Investment Trust, or REIT, is an exchange-traded security that invests in real estate. REITs often specialize in certain types of real estate investments. For example, an Equity REIT owns rental properties and a Mortgage REIT purchases or funds mortgage loans.
Real Estate Limited Partnership – RELP A Real Estate Limited Partnership, or RELP, is a business entity formed to profit from land holdings, either through development or capital appreciation. RELP partners participate directly in the business activities.
Real Estate Mortgage Investment Conduits – REMIC Real Estate Mortgage Investment Conduits, or REMICs, are securities that are backed by segmented pools of mortgages. Each segmented pool supports a different class of security, each of which carries a different maturity and coupon.
Real Estate Operating Company – REOC Real Estate Operating Company, or REOC, is an exchange-traded security that invests in real estate. REOCs are different from Real Estate Investment Trusts (REITs) because REOCs reinvest earnings back into the business, while REITs distribute all profits to investors. REOCs generally seek to provide investors with strong capital gains (rather than regular income).
Real estate or real property Real estate or real property are both terms for land, inclusive of the buildings and natural resources on the land.
Real estate owned Real estate owned is a lender’s portfolio of properties that failed to sell at foreclosure auctions. Once the property fails to sell at the auction, the lender must try to sell it on the real estate market. Investors target these properties, because they typically sell at a discount.
Real Estate Settlement Procedures Act Known as RESPA. A law protecting consumers from abuses and usury that requires lenders to give homebuyers advance notice of closing costs, settlement costs, relationships and lending practices.
Real estates Land, building or improvements on the property,
Real financing cost A rate that takes into account specific costs, fees, rate changes and the projected amount of time you will have the loan.
Real interest rate Real interest rate represents the rate earned by an investment, discounted for inflation. Say, for example, that an individual purchases a bond paying 6 percent interest, and the inflation rate is 5 percent. The real interest rate is 1 percent, or the portion of the rate that’s in excess of the inflation rate.
Real property Unmovable property, like buildings and land.
Realized gain Realized gain is the profit earned when an asset is sold for more than it cost to acquire. Realized gains usually have tax consequences.
Realized loss A realized loss occurs when an asset is sold for less than it cost to acquire. Realized losses can be used to offset the taxes owed on realized gains.
Realtist A Realtist is one who maintains membership in the National Association of Real Estate Brokers.
Realtor A real estate agent is a realtor when he is a member of The National Association of Realtors. It is also a registered collective membership mark that identifies with a real estate professional who is a member of the NAR and follows a strict code of ethics.
Reasonable and customary charges Reasonable and customary charges are standard fees charged by healthcare providers for a particular service or procedure.
Reassessment A reassessment is a second evaluation. In property taxes, a reassessment is the process of updating the taxable value of a property or properties.
Rebalancing Rebalancing is the process of re-allocating invested funds so that a portfolio follows an intended investment strategy. Periodic rebalancing is necessary because the allocation of funds will change as securities perform at different levels. For example, one security may experience a value increase of 25 percent, while the rest of the portfolio grows at an average of 8 percent. The investor will then have too much exposure in the out-performing security. Rebalancing will return the portfolio to the desired asset allocations.
Rebate A rebate is a partial refund of a purchase transaction. More generally, a rebate can also be a discount, incentive, or kickback, such as the discount provided when a bill of exchange is fulfilled before maturity. In a bond short sale, the lender will sometimes pay a rebate of interest earned on the sale’s proceeds to the seller.
Rebate card A rebate card is a plastic card that holds transaction data so that the customer can accrue cash or merchant credit. Rebate cards are used to foster customer loyalty.
Recast trigger Recast trigger is a predefined event that will reset payments on a negative-amortizing mortgage loan so that the mortgage converts to a fully amortizing structure. Mortgages that allow for negative amortization, such as Option ARMs, will have defined recast triggers. Usually, there’ll be a recast trigger date and a recast trigger amount. If the loan balance rises to a certain level, the mortgage automatically converts to fully amortizing payments. Otherwise, the loan will convert at the recast trigger date.
Receipt A receipt is the written documentation of a purchase transaction.
Receiver A receiver is an individual assigned to manage a bankrupt company’s assets, such that creditors can be paid back as much as possible. The receiver’s role may be limited to selling off the company’s assets, or it could involve managing company operations for a short period of time.
Receivership Receivership is a stage of a business bankruptcy proceeding. The company is said to be in receivership when the court has assigned an individual to run the operations temporarily.   This individual is tasked with managing the assets so that creditors can be repaid as much as possible.
Recession Recession is an economic state where overall production is stagnant or declining.   Generally, it’s viewed as a fall in the Gross Domestic Product for two quarters in a row.
Reciprocity Agreements between states that help reduce or eliminates non-resident fees at public universities to help lower costs for out-of-state residents.
Recognized gain or loss Recognized gain or loss is the profit earned, or deficit incurred, from the sale of an asset. When the asset is sold for more than its purchase price, the seller recognizes a gain. When the asset is sold for less than its purchase price, the seller recognizes a loss. Recognized gains are usually considered taxable income, but these gains can be offset by recognized losses.
Reconditioning reserve Reconditioning reserve is a deposit paid by one who leases a car; the reserve amount is held by the lessor and used to offset any amounts owed at lease maturity.
Reconveyance The official transfer of the property title after the mortgage has been paid in full.
Recorder A public or government official who keeps and maintains real-estate records.
Recording Recording is the entering of a document into public record. Transactions affecting property titles, such as ownership changes, liens, and leases, are usually recorded (by a County Recorder for example), so that the general public has access to the information.
Recording fee A fee charged by the government to file records of real estate.
Recourse loan A recourse loan is a secured debt facility extended to a   direct participation program or limited partnership that provides the lender with an ownership claim on the entity’s general assets in addition to the specified collateral. More generally, a recourse loan can also be a guaranteed loan, where the lender can go after the guarantor for payment if the borrower defaults.
Recurring debt Recurring debt is any repeating payment obligation that can’t be canceled. Child support payments and loan payments are both recurring debts. An individual’s total recurring debt level is considered by the lender during the loan approval process.
Red flag A red flag, in general, is a sign of a potential problem. In investing, a red flag is a factor that can potentially reduce the earnings power of a publicly traded company. A red flag, in this sense, can be almost anything that would affect the company’s operations, from pending legislation to technological advances.
Redemption Debtors sometimes may keep exempt secured property even though they owe money on it by paying the creditor the market value of the property rather than the amount of the debt.
Redevelopment or Enterprise Zone A Redevelopment or Enterprise Zone is an area that the government designates as needing incentives to promote business activity. Businesses that open or operate within the designated zone may be eligible for special tax breaks.
Redlining The illegal practice sometimes used by shady lenders and insurance companies to deny loans and other services to people because of their neighborhood or ethnicity.
Refinance wave A refinance wave is a trend of mortgage refinancing that is prompted by a large drop in market interest rates. The rate drop must large enough that borrowers can save a noticeable amount of money in total interest and monthly payment amount, even after considering the out-of-pocket closing costs associated with a refinance.
Refinancing Repaying a mortgage with another mortgage which has a lower interest rate. Homeowners typically take advantage of turning their equity into cash.
Refinancing risk Refinancing risk is the chance that the costs for renewing a debt facility will be higher than expected. Say, for example, that a company owes $100,000 on a short-term, interest-only loan. At maturity, if the company can’t pay off the debt, it must be refinanced at whatever rate is available, given prevailing economic conditions. There’s a risk that the best rate available will be higher than the company can afford.
Refund A refund is a return payment of previously collected funds. In taxes, for example, the government sends a refund check to taxpayers who overpay during the tax year.
Refundable credit Refundable credit is a tax credit that can result in the government owing funds to the taxpayer. Refundable credits can reduce a taxpayer’s tax liability to a negative number, such that the government then owes the negative amount to the taxpayer.
Regional bank A regional bank focuses its services on a target customer base that’s defined by a large geographic area, such as a state. Regional banks are somewhat larger than community banks, but they don’t have a national presence.
Registered Education Savings Plan – RESP Registered Education Savings Plan, or RESP, is a college savings program available in Canada. Contributions are made with after-tax money, but earnings made within the plan grow tax-free.
Registered Pension Plan – RPP Registered Pension Plan, or RPP, is a pension benefit trust available in Canada. An employer establishes the RPP, and contributions are made by the employer and employee. Contributions are tax-free and earnings are tax-deferred. Taxes are incurred on withdrawals made from the plan.
Registered Retirement Income Fund – RRIF Registered Retirement Income Fund, or RRIF, is an annuity program available in Canada. RRIFs are often funded by Registered Retirement Savings Plans (RRSPs). The RRIF is structured to provide a stream of income payments to the accountholder during retirement. These income payments are taxed as income.
Registered Retirement Savings Plan – RRSP A Registered Retirement Savings Plan, or RRSP, is a retirement trust available in Canada. Similar to the U.S. IRA, the RRSP allows for tax-deductible contributions and tax-deferred earnings. Money held in the RRSP can be invested in stocks, mutual funds, bonds, etc.
Registered Retirement Savings Plan Contribution – RRSP Contribution A Registered Retirement Savings Plan contribution, or RRSP contribution, is a tax-deductible deposit made to an RRSP, which is a retirement trust available in Canada.   RRSP contributions are subject to annual limitations, but any allowable amounts not used during the year can be carried forward indefinitely.
Registered Retirement Savings Plan Deduction – RRSP Deduction A Registered Retirement Savings Plan deduction, or RRSP deduction, is the tax break that occurs when a Canadian taxpayer deposits money into an RRSP retirement trust. The contribution amount can be deducted from the taxpayer’s taxable income, thus reducing the individual’s tax liability for the year.
Registered Retirement Savings Plan Deduction Limit – RRSP Deduction Limit Registered Retirement Savings Plan deduction limit, or RRSP deduction limit, is a cap on the tax breaks allowed for contributions made to a RRSP Canadian retirement trust. Deduction limits are calculated from the taxpayer’s annual income, with adjustments made for certain pension transactions and unused RRSP deductions from previous years. The RRSP deduction limit is listed on the taxpayer’s Notice of Assessment.
Regulation G Regulation G is legislation pertaining to loans made by lenders and other corporations to fund the purchase of securities.   It was adopted by the Federal Reserve Board in 1968.
Regulation T Regulation T is legislation pertaining to cash and margin accounts offered to consumers by brokerages. This Federal Reserve Board regulation limits margin loans to 50 percent of the purchase price of the securities.
Regulation U Regulation U is the Federal Reserve Board legislation that defines the requirements under which commercial lenders can offer credit secured by margin stock. Regulation U applies to commercial banks and credit unions, but not securities brokers or dealers.
Regulation Z A federal banking rule that implements the Truth-in-Lending Act. It requires standardized disclosures of credit costs.
Rehabilitation mortgage A home loan that is used to make improvements and to reconstruct the property. Sometimes this type of mortgage is rolled into the initial mortgage.
Rehabilitation mortgage or rehab mortgage A rehabilitation mortgage (rehab mortgage) is a real estate loan that finances both the purchase of a home and specified improvements to the property. Usually, the borrower will have to submit a detailed outline and cost estimate for the improvements during the loan approval process. After the purchase amount of the loan funds, the lender will set up an escrow account to hold and distribute the improvement portion.
Rehypothecation Rehypothecation is a bank’s pledge of customer-owned securities held in a margin account for the purposes of securing a loan.
Reinstate To reinstate is to restore or renew something. A past-due loan, for example, can be reinstated to current status once the necessary repayments are made. Also, insurance coverage can lapse due to non-payment, but the insured usually has a certain period of time to make the necessary premium payments and have the coverage reinstated.
REIT REIT stands for real estate investment trust.   This is an exchange-traded security that invests in real estate holdings such as commercial office buildings or mortgage loans. REITs receive tax benefits in return for passing 90 percent or more of their earnings to shareholders.
Rejection Rejection is denial of an application, such as for a loan or an insurance policy.
Relationship or member of household test Relationship of member of household test is one of five checks that confirm whether you can claim another individual as a dependent on your U.S. tax return. According to the relationship test, you can claim the individual as a dependent if that individual is your child, adopted child, stepchild, foster child, parent, stepparent, grandparent, sibling, half-brother, half-sister, step-sibling, child of a sibling, uncle, aunt, or relative by marriage (an in-law). Spouses are not dependents.
Release clause Release clause is legal language in a mortgage loan agreement that allows a portion of the property to be released from the loan collateral after a certain percentage of the debt has been repaid.
Release of liability A release of liability is the lender’s termination of a debtor’s responsibility to repay monies borrowed.
Reliction Land that is made available when a sea or river permanently recedes.
Relocation benefits A benefit that a company gives an employee when the company has asked the employee to relocate for the company’s benefit. These may include moving, packing, transportation, and storage. It may also encompass trips to look for real estate and temporary housing.
Relocation company A relocation company is a business that earns fees for helping transferred employees move to a new community.
Relocation mortgage – relo A relocation mortgage, or relo, is a real estate property loan designed specifically for transferred employees. Relos have special characteristics, such as discounted closing costs or closing costs paid for by the employer. Relos can also trade at a premium on the secondary market.   Because data indicates that relocated employees tend to move at regular intervals, the prepayment rate on these mortgages tends to be more predictable.
Remaining balance The amount left to pay on a loan.
Remaining principal balance Remaining principal balance is the amount of borrowed funds that has not been repaid as of a certain date.
Remaining term The amount of time it will take to pay off the loan.
REMIC (Real Estate Mortgage Investment Conduit) A tax entity that issues multiple classes of investor interests (securities) backed by a pool of mortgages.
Remote deposit capture Remote deposit capture is a banking service that eliminates the need for a bank to present a physical check to another bank for processing. Instead, the checkholder scans the check and forwards the scan (but not the check itself) to the paying bank for processing.
Renegotiable rate Renegotiable rate is the interest rate attached to a short-term loan that’s structured with a balloon payment due at maturity. During the short-term period, the interest rate is fixed; at maturity, however, the lender has the option to refinance the remaining amount due at a higher interest rate.
Rent loss insurance Rent loss insurance is a policy that protects an investment property owner from a loss in the property’s rental value due to damage.
Rent to own Rent-to-own describes an agreement between a merchant and a consumer whereby the consumer may use certain goods (usually furniture or appliances) temporarily by paying a periodic fee. The consumer can stop paying the fee and return the goods at any time. The consumer can also choose to purchase the goods by paying the periodic fee for a specified length of time, or by making an additional lump sum payment.   The exact terms of this option would be stated in the rent-to-own agreement.
Rental reimbursement Rental reimbursement is an optional type of auto insurance that pays for the cost of a rental car while your insured car is being repaired after an accident.
Renter’s insurance An insurance policy that pays for the loss and damage of personal property but not the real estate.
Reorganization plan Reorganization plan is a set of agreements made in a bankruptcy proceeding between a bankrupt individual or business, its creditors and the court. The plan specifies how certain past-due debts will be repaid over a specific timeframe, usually five years or less. During this time, the debtor must also remain current on other debts as they come due. Reorganization plans are an alternative to liquidation.
Repayment Repayment is the settlement, or paying back, of a debt.
Repayment period Repayment period is the window of time when further draws cannot be made against a home equity line of credit or unsecured line of credit; the only transactions allowed are repayments.
Repayment plan A modification of an existing loan after the borrower has been delinquent. Usually used when the borrower misses payments but the lender does not foreclose.
Replacement cost Replacement cost is the estimated expense of buying or building an asset to replace another asset. Replacement cost is relevant for insurance purposes, because the replacement of a used asset is likely to cost more than the asset’s market value.
Replacement reserve fund Replacement reserve fund is an account maintained by a homeowners or condominium association.   The money in the fund is used to replace property in common areas, such as swing sets or greenbelt benches.
Replevin Replevin is a legal proceeding taken by one who wishes to recover personal property that’s illegally held by someone else. Replevin can, for example, involve a creditor’s seizure of personal property (not real estate) that was used as collateral for debt.
Repossession When a lender takes back the property when the borrower stops making payments.
Requested cash out The amount of money you request to get back from your mortgage transaction.
Required minimum distribution Required minimum distribution, or RMD, pertains to traditional, SEP, and SIMPLE IRAs.   The IRA accountholder must take a certain amount of money out of the account by April 1 of the year he turns 70-1/2, and then every year thereafter. The exact amount is dependent on the person’s age and life expectancy. If the RMD isn’t taken, the accountholder will be charged an excise tax by the IRS.
Required minimum distribution – RMD Required minimum distribution, or RMD, pertains to traditional, SEP and SIMPLE IRAs.   The IRA accountholder must take a certain amount of money out of the account by April 1 of the year he turns 70-1/2, and then every year thereafter. The exact amount is dependent on the person’s age and life expectancy. If the RMD isn’t taken, the accountholder will be charged an excise tax by the IRS.
Resale value The selling price that would be negotiated by a willing seller and buyer for an existing home or property.
Rescheduled loan Rescheduled loan is a debt facility that has been restructured due to the borrower’s inability to make scheduled payments under the previous terms. Usually a rescheduled loan will have the maturity date extended from what was specified in the original loan agreement.
Rescission Rescission is the cancellation or annulment of a contract or obligation, often by mutual consent of the parties involved. In mortgage lending, for example, federal law provides the borrower with the right to rescind a mortgage agreement within three days of signing the document.
Reserve Reserve is any amount set aside to cover unexpected circumstances. In personal finance, a reserve can be the household’s emergency fund. In asset-based lending, the reserve is the value of the collateral over and above the debt outstanding.
Reserve fund Reserve fund is an amount of money set aside to cover unexpected circumstances. A homeowners association, for example, might have a reserve fund that’s used to pay for periodic repairs. Financial advisors recommend that households maintain a reserve fund that’s equivalent to three to six months of living expenses. Reserve funds can also be called emergency funds.
Reset Reset, in finance, refers to the update of an interest rate, so that it retains a specific relationship to a reference rate. On an adjustable-rate mortgage loan, for example, the rate is stated as a margin plus a specified reference rate. If this loan is structured to be reset annually, then the interest rate would be adjusted once a year to reflect any reference rate changes that occurred over the previous 12 months.
Reset frequency Reset frequency is the rate of occurrence of changes to an interest rate on an adjustable-rate loan. Reset frequency is specified in the loan documentation.
Resident alien A resident alien is an individual who lives in one country, but has citizenship in another. Resident aliens in the U.S. typically have a current green card, or have had a green card within the last calendar year. In the U.S., resident aliens generally pay the same taxes as U.S. citizens.
Residential mortgage Residential mortgage is a loan that’s secured by residential property. A residential mortgage is generally a long-term debt facility that can be structured with either fixed or adjustable interest. In the U.S., residential mortgage interest is tax-deductible.
Residual income Residual income is the money left over from earnings after debts are paid. Typically, residual income is analyzed in terms of one month’s income and debt requirements; the level of one’s residual income is a factor that lenders consider when evaluating a borrower’s creditworthiness. Higher residual income indicates that the individual will be more capable of meeting required debt payments when unexpected expenses arise.
Residual interest Residual interest is the interest available to lower tranches of investors in a real estate mortgage investment conduit.   Residual interest isn’t paid out until all regular interest payments have been made to the higher tranches of investors.
Residual value An agreed upon amount which represent the value of the car at the end of a lease.
RESPA See Real Estate Settlement Procedures Act
Respite care Respite care is temporary, short-term care of an ill, disabled, or invalid person, usually for the purposes of giving the primary caregiver a break. Respite care can be provided in-home or in another location, as agreed upon by the primary caregiver, the person needing care, and the respite provider.
Restrictive covenant A restrictive covenant is a rule that limits someone’s rights, usually either a borrower or a property owner. Homeowners associations place restrictive covenants on property owners to keep them from using the property in ways that are considered detrimental to the neighborhood. Commercial loan agreements also might include restrictive covenants, to prohibit the business from taking actions that may hinder its ability to repay the loan.
Restructured loan When a mortgage’s basic terms, such as interest rate, term and monthly payment, have been changed to prevent foreclosure.
Retail lender A retail lender is a financial institution that lends money to individual borrowers by way of mortgage loans, auto loans, and personal loans. Consumer banks, mortgage lenders, and credit unions are retail lenders.
Retail lending Retail lending is the service of lending money to individual consumers, such as homebuyers and auto buyers.
Retail note Retail note, also called a retail bond, is a type of debt investment that pays a fixed rate of interest for a specified time period. Retail notes are subordinated (meaning they have a lower priority relative to other debt) and unsecured. Investors purchase retail notes from a broker or from the issuer, which is usually a large corporation.
Retire To retire, in terms of employment, is to leave a job, either to seek another job, or to stop working entirely. In terms of debt, to retire is to pay off or fulfill a debt obligation.
Return on investment A percentage which dictates how much you invest in making improvements versus how much it is worth to someone who is potentially interested in buying your home.
Returned or “bounced” check charge Returned or “bounced” check charge is a fee charged to an accountholder when the bank returns a check unpaid because the account balance was not high enough to cover the check amount.
Reverse mortgage A type of loan that allows seniors homeowner to use the funds from their built-up equity. There are no payments due until the borrower moves, dies, or the property is sold. The final payment will not exceed the proceeds from the sale of the home.
Reverse-annuity mortgage Reverse-annuity mortgage is a type of real estate property loan that provides a stream of income payments to an elderly homeowner. These income payments are guaranteed until the borrower passes away. Debt repayments are not required until the borrower no longer lives in the home; at that time, the lender gains ownership of the home and sells it to recover the funds borrowed.
Revocable beneficiary A revocable beneficiary is a designated person who will receive a payout from an insurance policy, and who does’t have to consent to being removed from the policy. With a revocable beneficiary, the policyholder has the option to replace the designated person if circumstances change. This differs from an irrevocable beneficiary policy, which requires the beneficiary’s permission for any changes made to the policy beneficiary.
Revocable trust Revocable trust is a legal entity created to hold assets that allows the grantor of the trust to make changes to certain trust provisions. Income generated by trust assets are usually distributed to the grantor during her lifetime; after the grantor passes away, the assets are distributed to the trust beneficiaries.
Revolver Revolver describes a credit card holder who doesn’t pay off the full balance outstanding at the end of each billing cycle. The majority of credit card holders are revolvers, because they allow some of the debt to roll over into the next billing period.
Revolving credit A line of credit, typically a credit card, that does not have a specified repayment schedule but may require a minimum payment to cover interest and contribute to paying off principal.
Revolving line of credit Revolving line of credit is a debt instrument that allows the borrower to re-borrow amounts after they’ve been repaid. The lender approves the borrower for a certain debt limit, then allows the borrower to borrow (up to the limit), pay down, and borrow again until maturity. At maturity, the outstanding balance must be repaid, or the line of credit must be renewed.
RHS Loan RHS loan is a debt that’s either originated by the Rural Housing Service (RHS) through the United States Department of Agriculture (USDA), or guaranteed by RHS and the USDA. RHS is an agency of the USDA. The agency manages many programs, including some designed to support homeownership in rural areas. The term RHS loan can refer to any one of several RHS loan or mortgage loan programs.
Rich Rich describes someone who has great wealth. The term can also be used to refer to the class of people who have great wealth. More generally, rich can describe something that has a large supply of something else, as in “Avocados are rich in nutrients.”
Rider Rider is an add-on option in an insurance policy, that’s used to provide the insured with an extra type of coverage that would otherwise not be included in the policy.
Right of first refusal The agreement by an owner to give another party an opportunity to buy the property before offering it to anyone else.
Right of recourse Right of recourse is a lender’s privilege to pursue recovery of an unpaid debt through legal channels.
Right of rescission A right which allows a borrower to change his or her mind and cancel a loan within three days. Applicable to auto, home loans and refinancing.
Right to use vacation interval option Right to use vacation interval option is a type of timeshare ownership. The timeshare owner has the right to stay at the resort for a certain number of weeks per year, for a specified number of years. Alternatively, the owner may have a certain number of points, which can be exchanged for stays of a specified length. The timeshare owner doesn’t stay in the same unit every time.
Risk Risk is the danger of experiencing loss or harm. Risk is a primary concept in both insurance and in investing. Insurance companies set premium levels based on estimated risk of loss.   Investors choose their securities positions based, in part, on the level of risk that they can tolerate.
Risk discount Risk discount is the reduction in yield an investor accepts in return for reduced risk. As an example, an investor may voluntarily choose to purchase a government bond that yields 4 percent, rather than a corporate bond that yields 5 percent. The decision to take the lower yield (or risk discount) reflects the investor’s preference for virtually risk-free government bonds versus low-risk corporate bonds.
Risk tolerance Risk tolerance is an investor’s capacity to accept declines in the value of her investment portfolio. An investor with a low risk tolerance accepts lower returns for the security of knowing that the portfolio won’t suffer drastic decreases in value. An investor with a high risk tolerance is willing to take more chances in the hopes of a higher return.
Risk-based mortgage pricing Risk-based mortgage pricing is the practice of offering lower-rate mortgage loans to more creditworthy borrowers, and higher-rate mortgage loans to less creditworthy borrowers.
Roll in When you include certain closing costs, such as origination and settlement fees into the mortgage. This results in lower closing costs and higher monthly payments.
Roll in loans A refinancing loan that rolls any closing costs or fees into the loan.
Roll over Roll over is a type of loan that gives the borrower the option of renewing the debt at the maturity date.
Roll-in loans Roll-in loans are mortgage refinance loans that include the upfront closing costs in the loan amount. Rolling in the upfront costs allows the borrower to refinance, presumably to take advantage of a lower interest rate, without having to pay much out of pocket.
Rollover Rollover is the automatic renewal of a fixed time deposit, such as a CD, for the same maturity, but at an updated interest rate. Rollover also refers to the reinvestment of certain retirement accounts within the allowed window of time following a change in employment.
Rollover mortgage Rollover mortgage is an intermediate-term debt secured by real estate. The rollover mortgage has a fixed rate, but the loan expires in three to five years without fully amortizing. At maturity, the mortgage is renewed at the then-current interest rate.
Roth 401(k) Roth 401(k) is an employer-sponsored retirement savings plan that combines elements of a traditional 401(k) and a Roth IRA. As with the Roth IRA, contributions are made with after-tax money, but withdrawals and investment gains are tax-free. Notably, the Roth 401(k) has no income limitations, so anyone can contribute up to the specified limit, regardless of income.
Roth conversion Roth conversion is the process of transferring assets from a Traditional, SEP, or SIMPLE IRA into a Roth IRA. There may be tax consequences associated with a Roth conversion.
Roth IRA A Roth IRA is a type of tax-advantaged retirement savings account available in the U.S. Contributions to a Roth IRA are made with after-tax money, but earnings and qualified withdrawals are tax-free. Qualified withdrawals can’t be made until the account has been open for five years and the accountholder reaches aged 59 1/2. Roth IRAs are subject to annual contribution limits and income limitations.
Routing Transit Number – RTN Routing transit number, or RTN, is a nine-digit identification code used by U.S. banks. The RTN is printed on checks and facilitates clearing and processing.
Royalty income Royalty income is fees paid for the right to use another’s property, right, or artistic creation. Royalty income is usually paid as a percentage of sales.   A product inventor, for example, might contract with a manufacturer to receive 2 percent of the sales revenue every time the manufacturer sells one of the inventor’s products.
Rule of 72 Rule of 72 is a means of estimating how many years it will take to double an investment that’s earning a certain interest rate. To make the calculation, divide the compound interest rate by 72.   A 10 percent interest rate, for example, will double an investment in 7.2 years.
Rule of 78 Rule of 78 is a means of calculating an interest rebate on a prepaid installment loan where the interest is added to the loan balance upfront. The number 78 comes from the sum of 1 through 12, for the months of the year. If the borrower pays the loan after one month, the borrower will be charged 12/78 of the interest and refunded the rest. If prepayment occurs after two months, the charge will be 23/78, with the 23 representing 12 plus 11.
Rule of 78s Rule of 78 is a means of calculating an interest rebate on a prepaid installment loan where the interest is added to the loan balance upfront. The number 78 comes from the sum of 1 through 12, for the months of the year. If the borrower pays the loan after one month, the borrower will be charged 12/78 of the interest and refunded the rest. If prepayment occurs after two months, the charge will be 23/78, with the 23 representing 12 plus 11.
Running yield Running yield is a portfolio’s return divided by the portfolio’s market value, expressed as a percentage.
Rural Housing Service An agency of the US Department of Agriculture that provides farmers or other rural inhabitants financing to purchase land or homes when they cannot get a loan from other financial providers. These loans are have low interest rates and usually require no down payment.

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S&L S&L stands for savings and loan association. This is a financial institution that accepts deposits and uses them to originate mortgage loans.
S&P 500 Mini S&P 500 Mini is an investment that represents a designated percentage of an S&P derivative contract. S&P 500 futures and options contracts are exchange-traded and cash-settled; the Minis have these same characteristics, but trade at much lower prices. These lower prices make Minis available to individual investors, who use them for hedging purposes.
S&P no-load index fund An S&P no-load index fund is a fee-free mutual fund that invests in the stocks that comprise the S&P 500 stock market index. The S&P 500 contains primarily large-cap, American corporations.
S&P/Case-Shiller Home Price Indexes S&P/Case-Shiller Home Price Indexes track the volatility in U.S. home prices by collecting data on single-family properties that have been sold more than once in regular market transactions. There’s a national index and indexes for many metropolitan statistical areas (MSAs).
Safe harbor Safe harbor is a concept referenced in SEC legislation that protects a public company’s management team from liability for providing financial outlooks that later turn out to be inaccurate. To receive such protection, the management team must provide financial forecasts that reflect what management knows at the time the forecasts are published.
Safekeeping Safekeeping is the holding or guarding of an asset in an area where it cannot be damaged or stolen. Some financial institutions provide safekeeping as a service to their customers.
Salary reduction contribution Salary reduction contribution is an option on employee-sponsored retirement and savings plans, where the employee elects to direct a portion of her pre-tax earnings into the plan. The salary reduction contribution is also called elective deferral contribution.
Sale and leaseback Sale and leaseback is an arrangement whereby a property owner sells a property to another party who agrees to lease that property to the seller, once the transaction closes. A sale and leaseback is appropriate when the original owner must sell, but wants to continue using the property.
Sale contract A sale contract is a legal document specifying the terms of a property title transfer. The property can be real estate, or some other tangible asset.   The contract would describe the asset, specify the selling price, and list any contingencies.
Sale leaseback When the seller transfers the deed to the buyer, then rents the property from the new owner.
Sales agreement An agreement which is also known as the “purchase agreement” or “agreement of sale”, is the contract signed by buyer and seller stating the terms under which the property will be sold.
Sales and purchase agreement – SPA A sales and purchase agreement, or SPA, is a legal document that binds a buyer and seller to fulfill their respective parts of a sale transaction. SPAs are used with real estate and with large business transactions.
Sallie Mae The largest originator of student loans.
Same property rule Same property rule is a tax regulation pertaining to the use of IRA funds. When non-qualified withdrawals are made from an IRA, the funds must be rolled back into an IRA in the same form as they were withdrawn to avoid penalties. In other words, if an individual withdraws cash from one IRA, he must roll that money into a new IRA as cash and not as securities.
Sample sale A sample sale is a strategy to move excess merchandise. The strategy is popular with high-end clothing designers that have sample product on hand; the samples were probably used originally to sell clothing orders to retail distributors. Usually, the sample merchandise is in good shape, such that sample sales are great finds for bargain shoppers.
Sandwich lease A sandwich lease is a property use arrangement between a lessee and property owner, where the lessee subleases the property to a third party.
SARSEP IRA A SARSEP IRA is an outdated form of IRA that was offered by small companies for the benefit of their employees. Employees made pretax contributions to the SARSEP IRA through paycheck deductions. SARSEPS were replaced by SIMPLE IRAs in the 1990s.
SAT Stanford Achievement Test. A standardized test including math, critical reading and writing skills assessments. This test is often required for college admissions and most scholarships.
Satisfaction of a mortgage A document provided by the lender as evidence that the loan has been paid off. Usually, it is up to the borrower to remove the lien from the public record.
Satisfaction of debt Satisfaction of debt is the fulfillment of an obligation to repay borrowed money.
Savings Savings is the amount of one’s income that remains after expenses are deducted.
Savings account Savings account is a bank or credit union deposit that earns interest and can be withdrawn on demand.
Savings and Loan Association A state or federally-chartered financial institution that was a primary a provider of home mortgages by using depositor’s savings as financial backing.
Savings bank Savings bank is a financial institution that accepts consumer deposits and pays interest on those deposits.
Savings incentive match plan for employees Savings incentive match plan for employees is a type of tax-advantaged retirement plan offered by employers that have fewer than 100 employees.   More commonly known by the acronym SIMPLE, these plans are available as IRAs or 401(k)s.
Schedule A Schedule A is an income tax form used by U.S. taxpayers who itemize their deductions.   Taxpayers are allowed the option of taking a standard deduction, or calculating their deductions by itemizing certain expenses. Only those taxpayers who itemize their deductions need to complete Schedule A.
Schedule D Schedule D is an income tax form used by U.S. taxpayers who incur realized, taxable capital gains or losses during the tax year.
Scheduled recast A scheduled recast is a planned restructure of a mortgage loan’s payment structure. An interest-only mortgage, for example, may have a scheduled recast.   This would be the date the mortgage converts from interest-only to fully amortizing. On that date, the outstanding debt balance is used to calculate the payment amount required so that the mortgage will be fully paid off at maturity.
Schedules Schedules, in general, are forms intended for information reporting. The term is also used in reference to certain IRS tax forms.
Schematic designs The structural plans for a building’s mechanical, plumbing, and electrical systems.
Scholarship A financial reward that does not need to be repaid.
Schumer Box Schumer Box is an information table that’s included with credit card solicitations; the box specifies the card’s interest rates and important terms. The rate must be listed in 18-point type or larger, while the other terms must be at least 12-point type. Senator Chuck Schumer authored the legislation that requires card issuers to provide this information.
Second chance loan A second chance loan is a debt offered to a borrower who has prior credit problems.   Generally, this type of loan is characterized by restrictive terms and a high interest rate. The borrower generally stays with the second chance loan just long enough to rebuild her credit history, then refinances to a more affordable debt as soon as she qualifies.
Second mortgage A mortgage made subsequent to the previous one or subordinate to the first one. The lenders of the second mortgage gets paid after the first mortgage is paid.\\n\\nSee further First mortgage
Second surgical opinion Second surgical opinion is another physician’s perspective on whether a surgery is necessary. Some health insurance plans require two medical opinions before agreeing to cover the costs of a major surgery.
Secondary CD Secondary CD is a time deposit issued by a brokerage that can be bought or sold prior to maturity. Secondary CDs are theoretically more liquid than bank CDs (which must be held until maturity), but there’s no guarantee that the investor will be able to sell the CD for his full investment plus interest.
Secondary mortgage market Buying and selling of mortgages to collect more funds and grant new loans. It gives more liquidity to lenders.
Second-chance auction scam Second-chance auction scam is the practice of offering non-winning bidders the opportunity to purchase the item through unauthorized forms of payment, after the close of an online auction. Sometimes, this scam is used to obtain the bidder’s bank account information fraudulently.
Seconds Seconds is the term used for merchandise that’s badly damaged or flawed. Seconds are usually sold at huge discounts off the standard prices.
Second-to-die insurance Second-to-die insurance is a policy that’s written to two people, and pays benefits when the last surviving person dies. Usually, this type of insurance is used by married couples for the purpose of paying estate taxes or supporting surviving children.
Section 1031 Section 1031 is the part of U.S. tax law that defines a method for investors   to defer capital gains taxes. Such deferral is allowed when the appreciated property is exchanged for a “like-kind” property that’s to be used for business or investment purposes. An investor, for example, may sell one rental property and buy another with no tax effect. If the second property is sold with no corresponding reinvestment, taxes would then be assessed. The gain is calculated from the cost basis of the original investment.
Section 1035 exchange Section 1035 exchange is the name for a tax-free trade of one annuity contract for another, as defined by Section 1035 of the U.S. tax code. Such a trade must involve the same policyholder on both contracts and contracts that are equivalent in value.
Section 1245 Section is 1245 is the part of the U.S. Tax Code that explains how the sale of depreciable property may qualify as a taxable capital gain rather than taxable income.
Section 1250 Section 1250 is the part of the U.S. Tax Code that mandates the treatment of gains earned from the sale of real estate that has been depreciated on an accelerated basis. Any gain in excess of what would have been earned had the property been depreciated on a straight line basis, is taxed as regular income.
Section 179 expense Section 179 expense is the name for a fixed asset purchase that’s expensed through the income statement immediately, rather than being capitalized on the balance sheet and depreciated over time. This treatment is allowed under Section 179 of the U.S. Tax Code.
Secure option ARM Secure option ARM is a real estate mortgage loan that’s characterized by payment options and an initial fixed-rate period followed by an adjustable-rate period. For a specified period of time, the borrower has the option to make one of generally three   payment amounts. Making the lowest amount results in negative amortization; making the middle amount pays only the monthly interest; and making the largest amount reduces the principal balance. Because the mortgage carries a fixed-rate initially, these payment levels remain stable unless the negative amortization limit is reached. At some point, the fixed-rate period will end, and the loan will convert to an adjustable rate.
Secured card Secured card is a credit card that’s tied to a cash deposit. The cash deposit serves as collateral; the card issuer can dip into that deposit if required minimum payments on the account are not made. Secured credit cards are used by individuals who don’t qualify for a traditional credit card because they have poor or no credit.
Secured credit card Secured credit card is a credit card that’s tied to a cash deposit. The cash deposit serves as collateral; the card issuer can dip into that deposit if required minimum payments on the account are not made. Secured credit cards are used by individuals who don’t qualify for a traditional credit card because they have poor or no credit.
Secured debt Secured debt is a loan that’s supported by collateral. Mortgages are secured, because the lender takes a lien on the property, and has the right to foreclose in a default situation. Auto loans are also secured, because the lender takes a lien on the vehicle.
Secured loan A loan covered by a security, guarantee or collateral
Securities lending Securities lending is the practice of loaning securities positions. A broker might wish to borrow securities (rather than buy them) to cover a short position without impacting the stock value. These loans are usually supported by cash collateral.
Security Property which is designed and used as collateral.
Security deposit An amount, often one month’s payment, the dealer holds to be sure that the car will be returned in good condition.
Security freeze Security freeze, also called a credit freeze, is the temporary blocking of an individual’s or business’s debt payment history as maintained by a credit agency. The freeze blocks all access to the specified credit report and score, in order to prohibit the opening of new credit accounts under that identity.
Security interest Security interest is a lender’s/creditor’s ownership stake in a property that’s taken in support of a debt obligation.
Security loan Security loan is a debt that’s supported by collateral. The lender receives an ownership stake in the collateral that allows for seizure of the property if the borrower defaults.
Self employed borrower When a person is self employed, they may be looking for a type of mortgage that will let them be flexible in the amount of the payments from month to month. Many mortgage companies will work with someone in this situation to find a mutually agreeable mortgage situation.
Self-amortizing loan A self-amortizing loan is structured so that the sum of all the payments equals the total interest and amount borrowed. If all payments are made as scheduled, the debt balance will be zero at maturity. Traditional mortgages are self-amortizing, for example. Adjustable-rate loans can also be self-amortizing, but the payment amount will change with any changes to the interest rate.
Self-amortizing mortgage A self-amortizing mortgage is a real estate property loan that’s paid off at maturity, as long as all payments are made as scheduled. Normally this would be a fixed-rate mortgage, but adjustable-rate mortgages can be self-amortizing also. In a fixed-rate structure, the payment amount would be fixed; an adjustable-rate mortgage would have a fluctuating payment amount.
Self-directed IRA Self-directed IRA is a tax-advantaged retirement savings program that puts the responsibility for investment decisions on the account owner. A self-directed IRA allows the account owner to invest in other asset classes (such as real estate) besides securities. The IRS requires a trustee or custodian to hold the assets.
Self-employed person Someone who does not work for anyone else and who is running their own business, or trade and is the sole proprietor.
Self-employment tax Self-employment tax is the Social Security and Medicare contribution that’s required from self-employed taxpayers. These contributions are normally withheld from the taxpayer’s paycheck; self-employed taxpayers don’t receive a paycheck, so they’re assessed these taxes separately.
Seller broker One who earns a commission from the seller of a property in exchange for finding a buyer and assisting in the negotiations.
Seller carry-back An agreement in which the finance is provided by the property owner along with an assumed mortgage.
Seller financing Seller financing is a type of real estate financing that involves a loan made by the seller to the buyer. This arrangement might be made if the buyer doesn’t qualify for a traditional bank loan in the full amount of the purchase. The seller earns interest on the debt, and takes a security position in the property, just as a bank lender would. Seller financing is also called seller take-back.
Seller take-back Seller take-back is a type of real estate financing that involves a loan made by the seller to the buyer. This arrangement might be made if the buyer doesn’t qualify for a traditional bank loan in the full amount of the purchase. The seller earns interest on the debt, and takes a security position in the property, just as a bank lender would. Seller take-back is also called seller financing.
Seller’s agent An agent who works for a real estate firm and is loyal to the seller.
Seller’s market When the number of interested buyers is greater than the number of sellers which make the prices increase.
Semi-custom home A house in which the buyer cannot alter the layout, but can specify certain amenities.
Seminole quarterbacking Seminole quarterbacking is a slang term that means choking under pressure, or failing when the stakes are highest.
Senior Senior, in reference to debt, describes an obligation that has a higher priority claim on secured assets. If the assets have to be liquidated, the senior creditor is paid before junior creditors can be paid. In mortgages, the first mortgage is senior to the second mortgage.
Senior debt Senior debt is a loan that has repayment priority over another loan. If the borrower’s assets have to be sold off to repay creditors, the creditor holding the senior debt obligation will be paid back first. In mortgages, a first mortgage is a senior debt, and the second mortgage is a junior debt.
Senior security Senior security is an issued debt (such as a bond or debenture) that has a priority over other securities. If the security issuer’s assets must be liquidated, the holders of the senior security would be repaid before holders of junior securities.
SEP SEP is the abbreviation for Simplified Employee Pension Plan. SEP is a type of IRA that’s established by the employer on behalf of the employees. The employer can make tax-deductible contributions to employee SEPs up to a specified limit.
SEP IRA SEP IRA is a type of tax-advantaged retirement savings plan. The SEP is established by an employer on behalf of the employees. The employer can make tax-deductible contributions to employee SEPs up to a specified limit.
Separate return Separate return is a tax return filed by a married taxpayer who does not file jointly with his spouse. Married taxpayers can choose to file one joint return or two separate returns.   Generally, it’s beneficial to file jointly, but in some situations, it’s advantageous to file separately.
Series HH bond A Series HH bond is U.S. Treasury income security. The U.S. Treasury no longer issues Series HH bonds, although they’re still held by investors and earning income. The bonds pay interest twice a year for 10 years from the issue date; thereafter, the rate us set by the Treasury.
Serious delinquency When a single-family mortgage that is 90 days or more past due, or a multifamily mortgage that is two months past due.
Service charge Service charge is a generic term for a fee charged to a customer. Service charges are usually associated with a violation of account terms, such as allowing an account balance to drop below a specified minimum.
Service contract A contract that covers certain car repairs or problems after the manufacturer’s or dealer’s warranty expires. These warranties are sold by car manufacturers, dealers and independent companies.
Servicer An organization or company that collects monthly mortgage principal and interest payments from homeowners and manages escrow accounts. This company will also handle the collection of funds and the payment for your property taxes when they are due.
Servicing Servicing loans include collecting monthly payments, keeping records of loan progress, assuring payments of taxes and insurance etc.
Servicing strip Servicing strip is a security that’s backed by mortgage servicing fees. Theoretically, mortgage servicing fees are a long-term stream of cash flows.   As such, the securities backed by these fees trade on the secondary market, similar to the way in which mortgage-backed securities trade.
Settle Settle is to resolve. In financing, to settle is to pay off a loan obligation. In legal matters, to settle is to come to an agreement on a dispute. In investing, to settle is to finalize the processing of purchase transaction transfers.
Settlement cost (HUD guide) A book given to consumers after completing a loan application that provides an overview of the lending process.
Settlement sheet Settlement sheet is a statement that lists the distribution of funds associated with the closing of a real estate transaction. Items on the settlement sheet might include loan fees, property tax prepayments, insurance premiums, etc.
Settlement statement A document detailing who has paid what to whom.
Severance pay Severance pay is compensation provided by an employer to an employee upon termination of that person’s employment.
Share appreciation mortgage Share appreciation mortgage is a type of real estate property loan where the homeowner/borrower exchanges a portion of the property’s future value increases for a lower interest rate. Say, for example, that the agreement provides the lender 25 percent of the property’s appreciation over a period of 10 years. If the property value increases $100,000 in that time, the lender would be due $25,000. Usually, the lender receives its portion of the appreciation when the home is sold.   If the borrower doesn’t sell the home, he must pay the lender its portion in cash.
Share certificate A share certificate is a time deposit product issued by credit unions. Similar to a certificate of deposit (CD), the share certificate earns a fixed payment if it’s held for the designated time period.
Shared equity partnership An arrangement where one buyer lives in a home and the other has money invested in the property as an investment. The partners split the capital gain after the property is sold.
Shared-appreciation mortgage A home loan in which the lender offers a very low interest rate in exchange for a share in the home’s profit upon its sale.
Shared-equity partnership Shared-equity partnership is a property ownership arrangement between a homebuyer and an investor. The investor funds a portion of the home purchase and then splits the capital gains proportionally with the homeowner when the property is sold.
Short hedge Short hedge is the process of selling a derivative that isn’t owned (i.e., selling short), where the derivative hedges against an investment that is owned. In other words, a short hedge strategy is pursued to reduce risk associated with an investment that has already been purchased.
Short refinance Short refinance is the replacement of a mortgage, usually with a smaller mortgage, when the borrower is already in default.   This is done to transition the borrower to a more affordable payment structure. The lender has to write off the difference between the old mortgage and the new mortgage, but this may be preferable to foreclosure.
Short sale A short sale is an investing strategy that involves the sale of securities that are borrowed and not owned. The seller agrees to the transaction with the expectation that the security will go down in price; when the decline occurs, the seller can purchase the security on the open market at a lower price than the amount generated by the short sale.
Short tax year Short tax year is the term for a tax period that’s less than on year.   This only pertains to businesses, and can result from the midyear inception of a business or a change in the business’s fiscal year-end date.
Short-term Short-term describes something that has a brief duration. In accounting, short-term usually means 12 months or less. Short-term debt, for example, is an obligation that’s due and payable within one year.
Short-term bond fund Short-term bond fund is a mutual fund that invests in debt securities that mature in five years or less.
Short-term capital gain or loss Short-term capital gain or loss is the amount earned or lost on an asset that was sold after being held for less than 12 months. Short-term capital gains have a less favorable tax impact than long-term capital gains (which result from the sale of assets held longer than 12 months).
Sight letter of credit Sight letter of credit, or sight L/C, is a document used in international trade that’s payable to the holder if presented with certain supporting documentation. Sight L/Cs are different from traditional L/Cs in that the traditional L/C guarantees payment, but is not immediately payable.
Signature loan Signature loan is another name for an unsecured personal loan. This type of loan is made on the strength of the borrower’s credit rating and history, and no collateral is pledged. Banks may offer signature loans to their wealthy, long-standing customers.
Silent second mortgage A silent second mortgage is a secondary real estate loan that’s not disclosed to the primary lender. Since both a first and second mortgage lender take a security interest in the home, each lender should be notified of the other lender’s existence. Not doing so is usually fraud, particularly if the second mortgage is used to fund the down payment that the first mortgage lender requires.
SIMPLE SIMPLE is an acronym for Savings Incentive Match Plan for Employees, which is a type of retirement plan established by employers with a relatively small number of employees. SIMPLE plans can either be IRAs or 401(k)s. Employers can make tax-deductible contributions to employees’ accounts, either as a matching contribution, or a flat non-elective contribution.
Simple interest Interest computed only on the principal balance, without compounding.
Simple interest bi-weekly mortgage A simple interest bi-weekly mortgage is a real estate loan that’s structured with a payment due every two weeks.   These payments are applied to the principal balance as soon as they’re received. Because the payments are applied immediately, rather than being held and applied once monthly, the borrower realizes reduced interest costs over time.
Simple interest loan The interest accruing on the unpaid principal amount, excluding the compounding interest of total amount due.
SIMPLE IRA A SIMPLE IRA is a tax-advantaged retirement savings plan established by an employer for the benefit of employees. SIMPLE IRAs can be set up by employers that have 100 or fewer employees, and tax-deductible contributions can be made by employees and the employer.
Simple-interest mortgage A simple-interest mortgage is a real estate property loan that accrues interest daily rather than monthly. The daily interest rate is calculated by dividing the stated interest rate by 365 days; the resulting percentage is then applied to the outstanding balance. A simple-interest mortgage will result in higher total interest costs relative to a traditional mortgage.   This is because traditional mortgages accrue interest based on 12, 30-day months, which equates to 360 versus 365 days.
Simplified employee pension plan Simplified employee pension plan is a tax-advantaged retirement savings plan commonly used by small businesses and self-employed individuals. Referred to as the SEP IRA, this program has features similar to a traditional IRA. For example, contributions made are tax-deductible and earnings in the account are tax-deferred.
Single Single is a tax filing status used by unmarried individuals who don’t meet the requirements for any other filing status.
Single agency When the agent or broker represents and owes his or her fiduciary to only one party in a real-estate transaction.
Single-payment loan A single-payment loan features no periodic principal payments. Instead, the entire amount borrowed is due at maturity.
Sinking fund/reserves Sinking fund/reserves is an account where a debt issuer makes periodic deposits that will eventually be used to settle a large, long-term debt. A bond issuer, for example, might use a sinking fund to ease the repayment burden at bond maturity. The existence of the sinking fund is attractive to investors, because it lowers the risk associated with the security.
Skimming Skimming is a fraudulent practice of using a small device to scan the magnetic strip on a credit card, and record its information. Skimming is also a new product pricing strategy that involves setting a high price to attract a luxury-oriented customer. As the product matures in the marketplace, the price is usually lowered gradually to increase sales volume.
Skip payment mortgage A feature in some mortgages where the borrower can choose not to make the payment in a given month. The borrower would not be considered late or delinquent, but would incur higher interest charges as a result.
SLMA SLMA stands for Student Loan Marketing Association. This entity is now known as Sallie Mae, and is the leading provider of student loans in the U.S.
Smart cards Smart cards is a generic term referring to plastic, wallet-sized cards that hold data via a magnetic strip on the back. Smart cards can be designed to function as credit cards, identification cards, access cards, etc.
SMI SMI is supplemental medical insurance, also known as Medicare Part B. SMI is voluntary coverage that pays for certain medically necessary or prescribed, preventative benefits; the insured must pay a monthly premium.
Smishing Smishing is similar to phishing, only the practice uses SMS messages sent to cell phones rather than emails. The scam involves SMS messages that direct recipients to a website that either collects personal information (such as credit card numbers), or installs malware on the recipients’ phones.
Snowball Snowball is a debt pay-off technique involving pay-down of the highest-rate debt first. The borrower makes minimum payments on all accounts, except for the one with the highest rate. To the highest-rate account, the borrower pays as much as he can afford. Once this account is paid off, the borrower focuses on the highest-rate account of those remaining. This process is repeated until all accounts are paid down.
Social security number The eight digit number every US citizen is given at their birth. It is possible for a non-citizen who is a permanent resident to obtain a number. This number is used for identification, applying for loans, and for disbursement of social security monies upon retirement. It is recommended the one memorizes this number and is cautious when making it available to prevent identity theft.
Soft inquiry A designation a person’s credit report that indicates that someone has asked for a copy of his or her report. They are not included in the formula for determining a person’s credit score.
Soft loan Soft loan is a debt that carries a below-market interest rate. Soft loans are only made under special circumstances, such as between family members, or by an established government for the purposes of funding a developing country.
Spec home A house built before a buyer has been found, but with the assumption that one will be found.
Special assessment A special assessment is a tax charged to a property and paid by the property owner.   Proceeds from the tax are used to pay for specific public improvements that benefit the assessed property. An example of such a benefit might be the replacement of a curb or sidewalk in front of the assessed property.
Special finance Special finance is the segment of the auto loan industry that serves poor-credit or no-credit borrowers. A special finance loan will be more expensive than a loan to a better qualified borrower, because the risk of default is higher.
Special forbearance A situation where the lender arranges a revised repayment plan for the borrower that may include a temporary reduction or suspension of monthly loan payments in order to prevent a loss or foreclosure.
Special purchase Special purchase describes retail goods that were purchased in bulk by the retailer from the manufacturer. The retailer receives a discount from the manufacturer for the size of the order, and passes part of that discount to consumers via lower prices.
Specific-shares method Specific-shares method is a technique for calculating taxable capital gains on securities trades, for the purposes of minimizing taxable capital gains. Using this method, an investor would designate which shares he’d like to sell among the various identical shares held. For example, say an investor bought 50 shares of Acme Company for $55 each, and later bought 25 shares for $60 each. When the investor is ready to sell 10 shares, he can ask his broker to sell the $60 shares, because they have a higher cost basis. The resulting sale would minimize the investor’s capital gain and tax effect.
Speculation home or spec home or built on spec Speculation home, spec home, and built on spec all refer to a home that is built before a buyer is secured. The developer makes the investment to build the home on the belief that a buyer will be found.
Spending phase Spending phase refers to the time in one’s life after retirement when household cash flow comes from retirement savings, government subsidies, or investment income, rather than wages and salary. Spending may exceed income, because the individual might be traveling, following new interests, or otherwise enjoying his free time.
Spim Spim is the term for unwanted text messages; spim is the text equivalent of spam.
Spit Spit is the term for unwanted messages sent via VoIP, or Internet telephony. Spit is the Internet phone equivalent of spam.
Spoofing Spoofing is a stock market scam that temporarily and erroneously inflates a stock’s price. A trader will place a large and anonymous order for a certain stock through an electronic communication network, and then cancel the order just a moment later. The initial trade order causes the stock price to spike, which attracts buyers to that position. As buyers move to purchase the stock, the share price rises. The original trader can then sell his position at an inflated price.
Spousal contributions Spousal contributions are monies deposited to a spousal IRA. If a single income married couple files a joint tax return, the non-working spouse may be qualified to make tax-deductible contributions to a Spousal IRA. Generally, an individual with no taxable income doesn’t qualify for tax-deductible IRA contributions.
Square footage Square footage is the floor area of a building or room, calculated by multiplying the length in feet by the width in feet.
Stafford Loan Available to all families regardless of financial need. There are two types of loans: subsidized Staffords for students with financial need, and unsubsidized Staffords for those without need.
Stafford loans Stafford loans are federal government loans made to college students to help pay for education-related expenses. Subsidized Stafford loans are available to students with demonstrated financial need; the federal government pays the interest on these loans while the student is still in school. Unsubsidized Stafford loans are more widely available.   The student is responsible for the interest that accrues prior to graduation, but no payments are due until after graduation.
Standard card Standard card is a basic credit card that has no perks or added features. The standard card is differentiated from a gold or platinum card.
Standard deduction Standard deduction is a fixed tax deduction amount, usually based on filing status, that can be taken by individuals who do not itemize. The standard deduction represents a base level of income that doesn’t get taxed.
Standard mileage rate Standard mileage rate is an IRS-specified amount that can be used to calculate tax-deductible vehicle expenses. The mileage rate is used in lieu of tracking actual gas and car maintenance expenses.
Standard Payment Calculation The calculation which determines the amount needed to repay the loan in monthly installments.
Standby loan commitment Standby loan commitment is an offer of credit made by a lender that expires on a specified date. The standby loan commitment is expressed in a written document that states the terms of the proposed debt, as well as the expiration date of the offer.
Start rate Start rate is a term used for an adjustable-rate mortgage’s opening interest rate.
Starter home A home that is relatively small and inexpensive and bought as a first home; often a fixer-upper.
State tax ID or registration number State tax ID or registration number is a series of digits that functions as an identifier for a business, in the same way that a Social Security number would function for an individual. Businesses are usually required to obtain state tax ID numbers.
Stated income/stated asset mortgage – SISA Stated income/stated asset mortgage, or SISA, is a type of mortgage loan that doesn’t require verification of the borrower’s income and assets during the qualification process. SISA mortgages are appropriate for self-employed individuals, for example, who have sufficient income to make the mortgage payment, but can’t document that income. This type of loan falls within the Alt-A mortgage category, and is therefore priced higher than a prime mortgage would be.
Statement A statement is a written record of transactions on an account, such as a checking account or credit card account, that occur within a specified period of time.
Statement savings Statement savings is a traditional, liquid savings account on deposit with a bank or credit union. Statement savings accounts have low fees, but also pay very low interest rates.
Statutory employee A statutory employee is any taxpayer who reports wage and earnings income on a Schedule C, but is deemed an employee by statute. Social Security and Medicare taxes for statutory employees are the responsibility of the employer.   Hhme workers, for example, who fulfill their duties on employer-furnished equipment (such as a computer), may be deemed statutory employees. The statutory employee rule prevents employers from avoiding the responsibility of paying certain employee taxes.
Steering An illegal process in which a prospective buyer is shown properties only in specific neighborhoods where the residents share the buyer’s ethnicity.
Step-rate mortgage A mortgage with smaller payments at the beginning and then gradually increasing the payment amount after the first two years.
Sticker price Sticker price is the asking price on an automobile for sale at the dealer. The sticker price includes the manufacturer’s suggested retail price, plus the cost of options and various dealer charges. By federal law, car dealerships are required to display the sticker price on the vehicle’s window.
Sticky downward Sticky downward describes a trend of falling real estate values, where the home prices decline more slowly than they rise during a hot real estate market. The term can be applied to other up and down trends, as well. Wages, for example, can rise quickly, but an employer would have a difficult time trying to lower them.
Stock power Stock power is a power of attorney that allows one to transfer ownership of a security to another individual or entity. When a bank takes stock as loan collateral, the bank may require the borrower to provide the bank with stock power.
Stock savings plan Stock savings plan is a program that gives Canadian taxpayers tax breaks for investing in securities that support the provincial economy.
Stock screener Stock screener is an online database tool that allows investors to select a set of investment preferences, and then search for stocks that match them. Preferences can relate to P/E ratio, market cap, EPS growth, etc.
Stockholder’s equity A sum of proceeds from the issuance of stock and retained earnings less amounts paid to repurchase common shares.
Store of value Store of value is any asset or currency that holds value and can be exchanged for something else of value. In normal economic periods, currency is a store of value. When extreme economic cycles cause the public to distrust the value of a currency, consumers will begin trading with other stores of value, such as gold.
Straight life annuity Straight life annuity is a retirement planning product available through insurance companies, which makes regular payments to the annuitant (the person covered by the annuity) until death. There’s no beneficiary on this type of policy, so the payments cease at the annuitant’s passing. This product may be appropriate for one who’s primarily concerned with cash flow, but not for an individual who needs to provide for dependents.
Strategic asset allocation Strategic asset allocation is an investing strategy that involves keeping certain percentages of capital invested in specific asset classes. Because each investment will perform differently over time, the investor must periodically review the allocation of invested capital, rebalancing the positions to the desired percentages of the total portfolio.
Strike price Strike price is the specified price at which an option contract can be exercised. On a call option, the option holder can buy the security at the strike price; on a put option, the option holder can sell the security at the strike price. Strike price is also called exercise price, or grant price.
Stripper Stripper is a slang term referencing a homeowner who repeatedly cashes out home equity by refinancing. The term has the negative implication that the money raised through these refinances is spent frivolously rather than invested for future growth. Those who strip their equity in this fashion have a false sense of wealth.
Structured finance Structured finance is the segment of the commercial lending industry that provides complex debt products and solutions that are tailored for specific situations.
Student Aid Report (SAR) Summarizes the information provided on the FAFSA and indicates the expected family contribution (EFC).
Student loan Loans given to a potential student upon entering college or university to help pay for tuition and related expenses. Student loans carry lower interest charges than is typically available to consumers.
Student loan interest deduction Student loan interest deduction is a tax break available to U.S. taxpayers who paid interest on loans used for higher education during a given tax year.
Student Loan Marketing Association Student Loan Marketing Association is the former name for Sallie Mae, a federally established entity that’s now an independent, publicly traded corporation. Sallie Mae is the largest provider of student loans in the country.
Sub prime borrower A borrower who has been late on a mortgage payment or has a less-than-perfect credit report.
Sub prime mortgage A mortgage granted to a borrower considered sub prime, or has a low credit score due to a late payments or a default.
Subagent A commissioned real estate agent who finds a buyer for a property, but is not the property’s listing agent.
Subcontractor A person or company that does specialty work for a general contractor.
Subindex Subindex is a set of securities that comprise one specialized group of securities, and are also part of a more general group. An example is the Dow Jones Agricultural Sub-Index (DJAIGAG).
Subject property The home that you intend to obtain the mortgage on.
Submortgage A submortgage is a loan taken by a mortgage lender, where a customer’s mortgage (which was made by the lender) is pledged as the collateral.
Subordinate financing Subsequent mortgage to the first one on the property when a new loan is taken out.
Subordinate loan mortgage whose priority is below that of another mortgage, like a second or third mortgage or a home-equity loan.
Subordinated Subordinated describes a debt obligation that has a lower priority claim relative to senior creditors. The term can also describe the credit that’s owed the lower priority debt. If a liquidation is required, the subordinated creditors are paid with any funds left after the senior creditors have been paid.
Subordinated debt Subordinated debt is a debt obligation that has a lower priority claim relative to senior debt. If a liquidation is required, the creditors holding subordinated debt (also called subordinated creditors) are paid with any funds left after the senior creditors have been paid.
Subordination clause A subordinated clause is language found in certain mortgage agreements and bond indentures that automatically gives the current debt a higher priority claim over any debt that may be issued thereafter.
Subprime Subprime describes borrowers or loans that are less-than-ideal. A subprime borrower, for example, usually has a low credit score. A subprime loan is a debt obligation that doesn’t meet conservative underwriting standards, either because of the borrower’s qualifications, or the structure of the debt itself.
Subprime borrower Subprime borrower is a debtor who has a low credit score due to poor management of credit accounts in the past.
Subprime credit card Subprime credit card is a revolving credit account provided to individuals who have low credit scores, such that they don’t qualify for a conventional credit card. A subprime credit card will have a much higher interest rate than would be typical on a conventional credit card.
Subprime lender A subprime lender is a financial institution that specializes in making loans to lesser-qualified borrowers. Subprime lenders charge more to make these loans, because there’s a higher risk of default.
Subprime loan A subprime loan is a debt obligation made to a lesser-qualified borrower.   The subprime loan is typically characterized by a higher interest rate and more restrictive terms relative to a conventional loan of a similar type.
Subprime mortgage Subprime mortgage is a real estate property loan made to a lesser-qualified borrower.   A subprime mortgage carries a higher interest rate and more restrictive terms relative to a conventional (also called prime) mortgage. Borrowers of subprime mortgages generally have low credit scores and past documented credit issues.
Subrogate To subrogate is to substitute one party for another with respect to a legal claim. When a collection agency takes responsibility for a debt on behalf of a client, for example, subrogation occurs.
Substandard health annuity Substandard health annuity is a type of insurance contract that makes periodic payments to an individual whose lifespan is likely to be shortened by a pre-existing and documented health condition. Such an annuity would have a higher periodic payment amount because of the expected, shortened lifespan of the annuitant.
Subvented lease Subvented lease is a discounted lease offered by an auto dealer via the manufacturer, usually for vehicle models that aren’t selling well. The discount is achieved by lowering the rate of interest, or raising the vehicle’s residual value.
Super sinker Super sinker is a specialized bond that has a long-term yield and a short-term maturity. This type of bond might be backed by home mortgages; since a certain percentage of mortgages are paid off early, these prepayments can be used to repay principal to bondholders at maturity.
Superannuation Superannuation is another term for a company pension plan. This is an employer-established retirement plan that can be funded by employer or employee contributions. Contributions may be tax-deductible, and earnings within the account may be tax-deferred.
Supplemental Educational Opportunity Grant (SEOG) Paid for by a combination of government and college funds, these awards are given to undergraduates and can be up to $4000. Pell grant recipients receive highest priority for the grants.
Supplemental medical insurance Supplemental medical insurance is an extra form of health insurance coverage that adds to an individual’s primary coverage. Medicare Plan F, for example, is supplemental medical insurance.
Support test Support test is one of five tests used to determine if you can claim another individual as a dependent on your tax return. To fulfill the support test, you must have funded more than half of the other person’s living expenses during the tax year.
Surcharge Surcharge is an extra assessment, tax, or amount owed.
Surrender charge Surrender charge is an assessment imposed for cancelling a contract early. Insurance companies typically assess surrender charges when their customers cancel life insurance policies or annuity contracts prior to maturity. Surrender charge is also called surrender fee.
Surrender fee Surrender fee is an assessment imposed for cancelling a contract early. Insurance companies typically assess surrender fees when their customers cancel life insurance policies or annuity contracts prior to maturity. Surrender fee is also called surrender charge.
Surtax Surtax is an extra assessment imposed on an individual or entity. Surtaxes are normally in the form of a tempory increase in income tax, which might   be used to finance a major war or initiative.
Survery A drawing of a property by a lead surveyor showing precise measurements, boundary encroachments and other physical properties.
Survey Exact measurements of a parcel’s dimensions, relation to landmarks and location and dimensions of improvements. The survey will allow you to view from above, your lot lines and encroachments between you and your neighboring lots.
Suspicious Activity Report – SAR Suspicious Activity Report, or SAR, is a filing made by a financial institution when it suspects that an individual or entity is involved in money laundering activity or other related criminal violations of federal law. The SAR is filed with the Financial Crimes Enforcement Network (FinCEN).
Swap A swap is an agreement between two parties to trade streams of cash flow generated by two different financial instruments. This would be done to reduce or offset exposure to one factor, such as fixed interest rates or adjustable interest rates. When a swap involves interest rates, the two parties agree to exchange cash flows related to specified rates and a specified principal amount, but they don’t actually exchange the principal. Swaps can also involve two different currencies, where the parties are interested in reducing their exposure to certain foreign currency fluctuations.
Sweat equity It is a process where the future homeowner actually contributes to the construction of his home and thus accrues equity on his home.
Sweep account Sweep account is a deposit account that automatically transfers all or some of the cash on deposit into another, high-yield account. Brokerages typically offer this service, where all cash not invested in securities is automatically transferred into a money market fund or similar instrument.
Swing loan Swing loan is a short-term debt obligation that has a defined payoff source, such as a refinance to a long-term loan. Swing loans are also called bridge loans, or bridge financing.
Synthetic ID fraud Synthetic ID fraud is a credit/identity scam that involves creation of new, fictional identities. The criminals will often combine made-up information with a real Social Security number to create the new identity.
Synthetic lease Synthetic lease is an operating lease that’s not recorded on the balance sheet as a liability, but is instead treated as an expense. The leased property is also not recorded on the balance sheet. Synthetic leases also allow the lessee to realize certain tax advantages that are normally associated with capitalized property or equipment, such as accelerated depreciation deductions included in the lease payments.
Systematic withdrawal plan – SWP Systematic withdrawal plan, or SWP, is a mutual fund account feature that automatically withdraws funds from the account at regular intervals, and pays those funds out to the accountholder. An individual on a fixed income might benefit from SWP, as would someone who needs to meet mandatory retirement plan withdrawal requirements.
Systematic withdrawal schedule Systematic withdrawal schedule is a means of taking money out of an annuity account; the annuitant makes withdrawals of specific amounts at regular intervals until the account value has been depleted. A systematic withdrawal schedule does not guarantee the annuitant lifetime payments.

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T (tiered) T (tiered) is a notation in some interest rate tables that indicates a varied pricing structure. Usually the rate noted is the lowest rate available.
Tactical asset allocation – TAA Tactical asset allocation, or TAA, is an investing strategy that involves keeping certain percentages of total capital invested in specific asset classes. Because each investment will perform differently over time, the investor must periodically review the allocation of invested capital, rebalancing the positions to the desired percentages of the total portfolio. In some cases, the investor may wait to rebalance the portfolio to achieve certain short-term growth objectives.
Tangible personal property Assets outside of real estate that you can put your hands on. Examples may include business equipment, and vehicles.
Tax and penalty-free withdrawals Tax and penalty-free withdrawals are qualified transactions that remove money from an IRA without incurring taxes or fines. Prior to retirement, individuals are allowed to withdraw money from an IRA under certain circumstances, such as to pay for the costs of higher education.
Tax avoidance Tax avoidance is the practice of using legal methods to minimize income taxes. Taxpayers might pursue various levels of tax avoidance, such as contributing pretax earnings to retirement accounts, purchasing tax-free municipal bonds, or making qualified charitable contributions.
Tax bracket Different levels of income are taxed differently; your income determines what bracket you are in.
Tax certificate ID Tax certificate ID is a series of identifying digits that’s issued to a business by the state for the purposes of collecting sales tax.
Tax credits These are like coupons for the supermarket. You can use them to reduce the amount of tax you owe.
Tax deductions Amounts of money that the IRS allows you to subtract from your income before computing your income tax. These are similar to tax credits.
Tax deferral Postponing your taxes to a later date or even year. This will only delay your liability it will not make it disappear.
Tax deferred Earnings and income that are not taxable now but will be at a later date. This is most common in retirement plans distributions.
Tax exempt The part of your income that is not taxable or subject to tax.
Tax fairness Tax fairness is the concept that all taxpayers should be assessed an equivalent and fair level of income taxes. Those who argue for tax fairness take issue with tax loopholes that unfairly benefit a minority segment of taxpayers.
Tax home Tax home is a taxpayer’s primary place of residence. This concept is relevant in the calculation of tax-deductible travel and transportation expenses.
Tax impound Money collected by the lender for the annual tax payment.
Tax liability The amount of money you owe for taxes.
Tax lien When taxes are not paid, a tax lien is put against the property before it can be sold in order to secure that the taxes will be paid.
Tax preference items Tax preference items are specific income and expense figures that are used in the calculation of Alternative Minimum Tax (AMT) in U.S. tax law. Some of the tax preference items are: addition of personal exemptions, addition of standard deduction, subtraction of any state and local tax refund included in gross income, and changes to passive activity loss deductions.
Tax return Tax return is a generic term for the set of forms that are submitted to a taxing authority (such as the IRS) which document an individual’s or entity’s annual tax liability.
Tax sale When the government sells a property in order to recover unpaid taxes. The property is sold to the highest bidder at a public auction after the owner and mortgage company have been given notice.
Tax schedules Forms published by the IRS for persons with a taxable income of more than $100,000, used to calculate their income tax.
Tax shelter An investment that makes it feasible to hide money from taxes. The IRS has out restrictions on tax shelters when it seems the sole purpose of the investment is to evade paying taxes.
Tax stamps A levy mandated by the government on the transfer of ownership of real estate.
Tax tables Tables published by the IRS for taxpayers with an income of 100,000 or less used to calculate their income tax.
Taxable estate Taxable estate is the value of a decedent’s estate that’s used to calculate death taxes, also known as estate taxes. Generally, the taxable estate equals the total value of the assets, less liabilities and any tax-deductible assets.
Taxable income Your gross income minus all of your adjustments, deductions, and exemptions.
Taxes Taxes are fees assessed by a governing body. Taxes are typically assessed on transactions (sales tax), property (property and vehicle taxes), and income (income tax).
Tax-exempt security Tax-exempt security is a mutual fund or bond that produces income which isn’t subject to federal income taxes. Tax-free municipal bonds are an example.   These are fixed-income securities issued by state, county, city, or local governments. Mutual funds that invest strictly in tax-exempt securities would also be tax-exempt.
Tax-free money market mutual fund Tax-free money market mutual fund is a diversified investment fund that invests only in short-term, tax-exempt securities. These funds are usually purchased through brokers and provide income that’s free from federal tax liability.
Taxpayer Identification Number Your social security number as an individual or your employee identification number (EIN) for your business.
Tax-sheltered annuity Tax-sheltered annuity is a type of retirement planning instrument available to employees of tax-exempt organizations. Contributions are tax-deductible and earnings within the annuity aren’t taxed until withdrawn.
Tear down condition A house that is purchased so that is can be leveled to make a space for a brand new home.
Tear sheets Tear sheets are the summaries of public companies that are published by Standard & Poor’s (S&P). An S&P summary includes an overview of the company’s operations and key performance metrics. In advertising, tear sheets are pages removed from a publication and sent to an advertiser as proof that the advertisement was run.
Tear-down condition Tear-down condition describes a residential home that’s meager in relation to its physical property location. The land is likely to have a high value because, as an example, it overlooks a fairway or lake. Buyers who can afford to buy the land would most likely demolish the old home and build a new one.
Teaser rate Usually seen on the mass mailings for credit card offers with a fantastic introductory rate used to lure consumers to switch credit cards. This rate is temporary and below market.
TED spread TED spread is a metric that’s tracked as an indicator of market credit risk. It’s calculated as the difference in pricing between a three-month U.S. Treasury bill, and three-month LIBOR. A widening of the TED spread indicates a greater risk of default among borrowers.
Temporary lender A temporary lender is a financial institution that makes mortgage loans and then sells them on the secondary market immediately after close. Temporary lenders don’t keep a portfolio of loans; they earn money through fees charged to the borrower, and by selling the loans at a premium.
Tenancy by Entirety An agreement in some states where the husband and wife are considered one person and upon death, the other automatically assumes ownership.
Tenancy by the entirety Tenancy by the entirety is a property ownership arrangement used in some states by married couples. If the couple owns a home as tenants by the entirety, neither one of them can dispose of their ownership interest, and when one co-owner passes, ownership automatically transfers to the surviving co-owner.
Tenancy in common Tenancy in common is a co-ownership arrangement that gives each owner the right to have his ownership interest transferred, upon his death, to a beneficiary. While living, both owners have an equal right to use the property.
Tenancy in Partnership When a property is in the name of a partnership as opposed to individual names.
Tenants by entirety – TBE Tenancy by entirety, or TBE, is a property ownership arrangement used in some states by married couples. If the couple owns a home as tenants by the entirety, neither one of them can dispose of his or her ownership interest, and when one co-owner passes, ownership automatically transfers to the surviving co-owner.
Tenement Tenement is a synonym for apartment, but the term often is usually associated with low-income housing in an urban area.
Ten-year Treasury Constant Maturity Ten-year Constant Maturity Treasury is an index that’s periodically published by the U.S. Treasury. The index value is calculated by adjusting the yields of recently auctioned U.S. Treasury bills and notes of varying maturities to the equivalent of a ten-year yield.
Term The scheduled length of time for paying off a loan.
Term certain annuity Term certain annuity is a financial planning product that pays the holder (called the annuitant) a fixed periodic payment for a set time frame. Since there is no opportunity to extend the payments past the specified time frame, purchasers of term certain annuities should consult with a financial planner to determine if this is the most appropriate product available.
Term deposit Term deposit is a savings product that can’t be withdrawn until a specified amount of time has passed. The most common term deposit is a CD, which pays a higher yield than a liquid savings deposit.
Term loan A term loan is a commercial debt made by a bank or finance company that’s repaid with periodic principal repayments. Term loan debt can’t be re-borrowed once it’s paid off.
Termination statement A termination statement documents a borrower’s fulfillment of an asset-based debt facility. Once the loan has been paid off, the lender no longer has ownership rights to the assets that were used as collateral for the loan.
Testamentary trust Testamentary trust is a property ownership arrangement that’s established according to instructions within a will, and after the grantor has died. Generally, the trust will hold the decedent’s property. An appointed executor must manage the property and make distributions to beneficiaries in accordance with the grantor’s wishes.
Tester A tester is a person or thing that evaluates something’s effectiveness or usefulness.
The Fed Have you heard of Alan Greenspan? He is a Fed. He is the chairman of this seven member Board of Governors which is in charge of regulating and monitoring or economy and monetary policy so that we can find a stasis. The Fed is informal for the Federal Reserve System.
Therapeutic alternatives Therapeutic alternatives are medications that differ chemically, but treat certain conditions in the same way as other drugs. Therapeutic alternatives are often considered when the first choice of medication is prohibitively expensive.
Third party originator The person or company that gathers all the pieces of a mortgage application and transfers or sells it to the lender.
Third-party administrator Third-party administrator, or TPA, is a company that’s contracted to be a liaison between an insurance company and members of a group plan issued by that insurance company.
Third-party originator Third-party originator is an entity or person who markets mortgages and collects mortgage applications from prospective borrowers.   These leads are turned over to a lender for funding.
Third-party payer Third-party payer is an entity that’s responsible for a person’s medical expenses, e.g., an insurance company.
Three-year rule Three-year rule refers to a tax law that discourages individuals from gifting assets to others when death is imminent, solely for the purposes of avoiding estate tax. Section 2035 of the tax code states that if certain assets are transferred or gifted to someone else within three years of the decedent’s death, those assets must be included in the estate, and taxed accordingly.
Thrift Thrift refers to a financial institution that holds deposits, primarily for individuals.
Thrift savings plan – TSP Thrift savings plan, or TSP, is a defined-contribution retirement savings plan available to federal employees. The TSP functions like a 401(k) plan in that the employee makes contributions through automatic salary reductions, and the employing agency may have some contributing matching program. Contributions can be invested in one of several investment funds.
Timber Investment Management Organization – TIMO Timber Investment Management Organization, or TIMO, is an entity that manages timberland investments on behalf of institutional investors. Some institutional investors diversify their portfolios by holding timberland investments, but they’re not equipped to find and manage appropriate properties for maximum returns. TIMOs fill this need.
Timberland investment Timberland investment is a tree farm, or managed natural forest, that’s held by an institutional investor as part of an investment portfolio. Timberland investments are attractive to institutional investors because these properties tend to respond differently to economic conditions than stocks or bonds, which helps even out the return of the overall portfolio. Timberland investments are also relatively low risk, but produce strong returns.
Time deposit Time deposit is a savings product that can’t be withdrawn until a specified period of time has passed. In return for reduced liquidity, the depositor earns a higher yield relative to regular savings deposits. CDs are time deposits.
Time note A time note is a contract related to a debt obligation that specifies the dates on which repayments are to be made.
Time share When multiple people own a piece of property in which each owner has access to the property at intervals throughout the year.
TIPS TIPS, or Treasury inflation-protected securities, are U.S. Treasury-issued bonds that automatically adjust the principal for inflation, as measured by the consumer price index. Since interest is paid on the principal amount, the yield benefits from these periodic inflation adjustments. TIPS pay interest every six months, and the principal is repaid at maturity.
Title A lawful document showing proof of a person’s right to ownership of a property.
Title 1 A loan which is taken out to help a home owner make basic repairs and improvements to their home.
Title company The company which researches the property’s title for liens. judgments, and obstacles which will impeded the sale, repairs and the title, supervises the closing, and ensures all money transactions are complete and accurate.
Title defect When others make a legal claim to property and make demands on the owner.
Title insurance Insurance that protects the lender’s interests and the buyer’s interests against loss resulting from dispute over title or ownership of a property
Title search An investigation into the title records to prove legal ownership of the seller’s property and to check that there is no prior claim on liens.
Total debt service ratio – TDS Total debt service ratio, or TDS, is the percentage of an individual’s income that must be used to make debt payments and mortgage payments, including insurance and taxes. This ratio is commonly evaluated when an individual applies for a mortgage loan.   A lower TDS is better, as this means the borrower has more capacity to withstand unexpected circumstances.
Total expense ratio A ratio comparing the total amount of income against the total number of debt payments.
Total housing expense Total housing expense is the total of an individual’s mortgage payments, inclusive of property taxes and homeowners insurance, plus any other required monthly debt repayments.
Townhouse Typically, a series of homes which share a common wall but stand on individual lots. The owner holds the title to the land and the home.
TPA TPA, or third-party administrator, is a company that’s contracted to be a liaison between an insurance company and members of a group plan issued by that insurance company.
Trade equity When a piece of property is used in a swap for a down payment on a property. For example, trading a car for a down payment on a house.
Trade line Trade line refers to an account shown on a credit report.
Trade lines Each different credit account listed on your credit report. Trade lines can affect your credit score and help determine what you are eligible for.
Trade-in value The amount of cash a car dealer will give you for your vehicle as a down payment in the purchase of a new car.
Trading account Trading account is an account held by an investor with an investment dealer that’s used to settle securities purchases and sales. Trading accounts can hold cash, foreign investments, and various other types of securities.
Trading down Making a move from a high end home to a less expensive home.
Trading up Making a move from a house into a more expensive home.
Traditional IRA The original self motivated retirement plan. A person may contribute money into their IRA annually depending on how much they’ve earned. These contributions may be tax deductible depending on your income and if you are covered by a retirement plan at your place of employment.
Traditional whole life policy Traditional whole life policy is a life insurance agreement that doesn’t expire.   The policy ends when the insured dies and the agreed-upon payment is made to the insured’s beneficiaries. Whole life policies build up cash value over time, which can be borrowed against or withdrawn by the insured. If the insured cancels the policy before death, he may receive a cash surrender value.
Trans fat Trans fat is an unsaturated vegetable oil that has been chemically altered to remain solid or semi-solid at room temperature. Trans fats are used to lengthen a food’s shelf life.
Transaction broker or agency The company that works for both the buyer and seller but makes it clear that they are not in a fiduciary relationship with either side. The broker will be hired to help them reach an agreement. The Switzerland of real estate.
Transaction broker or transaction agency Transaction broker, or transaction agency, is a real estate agent or firm that represents both buyer and seller in a real estate transaction. Neither buyer nor seller is represented by an agent that will pursue their best interests. Conflicts are sometimes resolved by bringing in an independent real estate professional.
Transaction date Transaction date is the actual date that a sale was made, or an account action was taken. The transaction date may differ from the settlement date, which is the date on which the details of the transaction are recorded and finalized.
Transfer Transfer is the switch of ownership rights to an asset from one party to another. A transfer can also be the movement of money from one account to another. Specific to IRAs, a transfer is the movement of assets from one retirement plan to another, where such movement qualifies as a tax-free, non-reportable incident.
Transfer of risk Transfer of risk is a basic premise of insurance. The arrangement between an insured and insurance provider is always transfer of risk, because the insurance provider accepts financial responsibility for losses associated with certain events, should those events occur. The insurance company accepts a fee or premium for accepting the risk transfer.
Transfer on death – TOD Transfer on death, or TOD, is a designation that can be placed on securities positions or accounts that keeps these assets out of probate when the owner dies. If the owner designated a TOD beneficiary, the securities will be immediately transferred to that beneficiary upon death. There’s no change in the owner’s rights to the assets while the owner is alive.
Transfer tax A tax issued on the transfer of title in a real estate transaction.
TransUnion One of the three largest credit reporting agencies along with Experian and Equifax.
Treasury bill or Treasury note Treasury bill, or Treasury note, is short-term debt security that’s issued and backed by the U.S. government. Treasury bills are sold at a discount, so that the value of the bond increases as the maturity date approaches. Investors realize yield by purchasing the bond at a discount, and then selling it for a higher price at a later date.
Treasury index A grouping of indexes that are used to determine the interest rate changes on adjustable rate mortgages.
Treasury note or bill A US government debt with a maturity from one to ten years. Expressed as a note.
Triple net lease Triple net lease is a lease that assigns responsibility for taxes, insurance, and maintenance costs to the lessee rather than the property owner. Triple net leases are sometimes called net-net-net leases, or hell or high water leases.
Trojan horse A Trojan horse is a malicious software program that’s disguised as being legitimate, so that users inadvertently open the program and run it. Trojans are used by hackers to gain unauthorized access to other computers and files.
Trust Similar to a will. A relationship where a person transfers valuables or assets to a trustee who manages this property for the benefit of the beneficiary.
Trust account An account which manages the earnest money, money set aside for repairs, and other prepaid closing monies. These accounts are managed by the broker or the escrow agent.
Trust deed Trust deed is a legally binding document that establishes ownership rights of a property. It’s sometimes used to document the financing of real estate purchases, where ownership is assigned to a trustee until the loan is paid off. Ownership rights are transferred to the owner only after the debt obligation is fulfilled. In these arrangements, the trustee remains silent unless the borrower defaults.
Trustee A person who manages the assets.
Truth in Lending Truth in Lending, also known as TILA, is federal legislation that addresses predatory lending practices. Under TILA, lenders must provide loan applicants with basic loan information, such as annual percentage rate (APR), minimum payment, annual fees, credit insurance fees, etc. This information, which is provided before loan funding, assists the applicant in budgeting and in comparing competitive loan offers.
Truth-in-lending act Disclosure in writing the terms and conditions of   mortgage charges and annual percentage rate (APR) as required by the federal law.
Tuition reimbursement plan A benefit offered by many companies as an incentive for their employees to continue their education by repaying for their tuition.
Two-cycle billing Two-cycle billing is a means of calculating finance charges on a credit card account. The finance charges are assessed by multiplying the rate by the average daily balance on the account for the past two months. This method tends to result in higher finance charges.
Two-step mortgage A mortgage (ARM) with an adjustable interest rate where the borrower pays a certain interest rate (usually below market rate) for the first 7 years which is then later adjusted to the market rate for the remaining period
Two-year Treasury constant maturity Two-year Treasury constant maturity is an index that’s periodically published by the U.S. Treasury. The index value is calculated by adjusting the yields of recently auctioned U.S. Treasury bills and notes of varying maturities to the equivalent of a two-year yield.

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U.S. Department of Housing and Urban Development The U.S. Department of Housing and Urban Development, also known as HUD, is a federal department that establishes and enforces the country’s housing policies. The Federal Housing Administration, or FHA, is part of HUD.
Underinsured driver Underinsured driver is an optional coverage type available on auto insurance policies. Underinsured driver coverage pays the insured for any medical expenses or auto repair expenses that exceed the insurance limits on the at-fault party’s policy.
Underpayment penalty The penalty for not paying enough total estimated tax and withholding. You can avoid underpayment penalties by paying a percentage amount of last year’s tax due or of the current year’s expected tax due.
Underwater When you owe more on the loan for a property or car than the asset is worth; you have a feeling of being underwater.
Underwriting The process by which the lender decides if they will lend money. This decision is based on the value of the property, the borrower’s credit history and any other relevant factors. It is also used to mean the process of issuing insurance policies.
Unearned income Income which comes from interest, dividends, capital gains or rents, as opposed to earned income, such as wages, tips and salaries.
Unearned interest Unearned interest is an account on a lender’s balance sheet that represents interest amounts that were collected in advance of being accrued.
Unified Managed Account – UMA Unified managed account, or UMA, is a fee-based investment management product that includes all of the assets in an investor’s portfolio, including stock positions, mutual funds, hedge funds, separate accounts, etc. A unified account makes it easier for the investor or money manager to employ a comprehensive investing strategy and maintain proper asset allocations.
Uniform Gift to Minors Uniform Gift to Minors, also known as UGMA, is a trust that allows minors to invest in securities. Parents establish UGMAs on behalf of their children, and any funds deposited by the parents are considered irrevocable gifts. When the child reaches the age of 18 or 21 (depending on the state), he receives full control of the assets in the account.
Uniform Premarital Agreement Act Uniform Premarital Agreement Act is state legislation that gives the parties to a premarital contract the option to choose the state that will have jurisdiction over the premarital contract. The state can be one in which either party lives or plans to live. It can also be the state in which the couple is to be married. Not all states have passed the Uniform Premarital Agreement Act, which limits the legislation’s effectiveness somewhat.
Uniform Transfer to Minors Act – UTMA Uniform Transfer to Minors Act, or UTMA, is legislation that allows parents to establish a trust account for their children.   The trust account can invest in securities, as well as real estate, patents, royalties, and fine art on behalf of a minor child. Assets deposited to the account are subject to gift taxation laws. When the child reaches the age of 18 or 21 (depending on the state), she receives full control of the assets in the account.
Uninsured driver or motorist Uninsured driver or motorist is an optional coverage type available on an auto insurance policy. Uninsured driver or motorist coverage pays the insured for injuries or damages that result from being hit by another driver who doesn’t have auto insurance.
Universal default Universal default is a policy of some lenders that allows them to punish borrowers who pay any creditor late.
Universal life insurance Universal life insurance is an insurance contract that remains in force for the insured’s lifetime, pays a benefit to designated beneficiaries upon the insured’s death, and builds a cash value over time. A portion of the premium goes towards the death payment, and a portion is directed into yield-generating investments. The insured has the ability to transfer funds between the two parts of the policy, such as using investment earnings to pay premiums.
Unpaid dividend Unpaid dividend is a profit distribution to owners that has been declared but not yet remitted.
Unrecorded deed document that transfers title to property, but which is not filed with a county recorder
Unscheduled recast Unscheduled recast is a recalculation of payments due on a loan that’s triggered by something other than the passing of time since funding. Unscheduled recasts are usually triggered by certain events, which would be specified in the loan documentation. Negative amortization mortgages are subject to unscheduled recasts; when the balance reaches an upper limit on the negative amortization, a recast is triggered. In this case, the recast will increase the payment amount substantially.
Unsecured Unsecured describes a loan that’s not supported by collateral. Unsecured debt is riskier for the lender, because there’s little recourse available if the borrower doesn’t repay as promised. A traditional credit card is unsecured.
Unsecured claim claim or debt for which a creditor holds no special assurance of payment, unlike a mortgage or lien; a debt for which credit was extended based solely upon the creditor’s assessment of the debtor’s future ability to pay.
Unsecured debt Debt that is not guaranteed by the pledge of any collateral. Most credit cards are unsecured debt, which is a main reason why their interest rate is higher than other forms of lending, such as mortgages, which employ property as collateral.
Unsecured loan advance of money that is not secured by collateral.
Unsecured personal loan An unsecured personal loan is a debt obligation that’s made based on the integrity and credit history of the borrower; no collateral is taken by the lender. Generally, an unsecured personal loan is structured with a fixed-rate and fixed payment amount. The funds can be used for business start-up, debt consolidation, or even college tuition.
Up-front costs costs that must be paid at the time of signing a car lease agreement. These can include the first month’s payment, a refundable security deposit, a capitalized cost reduction or down payment, taxes, registration and other fees.
Upgrades Options that allow buyers of newly built houses to select higher-quality floor coverings, cabinets, windows and other amenities for more money.
Upside down An unwanted financial position that consumers find themselves in when the outstanding balance of a loan is higher than the current fair market value of the property.
Upzoning A controversial process of changing the zoning in an area, usually to allow greater density or commercial use. This term can also be used to mean the opposite: changing the zoning in a broad area to limit growth and density.
US Department of Urban Housing and Development The federal department that formulates and enforces housing policy and governs the Federal Housing Administration.
Usage data Usage data is information related to how a customer navigates through the pages of a website. This data can be used to improve the information flow on the website, and to help advertisers understand how their ad is being shown.
Use tax Use tax is an assessment placed on goods purchased in another state where no sales tax is charged.   If an individual purchases an item outside of his residence state and doesn’t pay sales tax, that person’s home state may charge a use tax if the item is going to be used in the home state. The use tax rate is generally equivalent to the home state’s sales tax rate.
Useful life Useful life refers to the length of time in years that a depreciable asset will be productive. The IRS defines useful lives for most business assets, including computers and vehicles. The useful life determines how the asset is depreciated, which in turn affects the business’s taxable income.
Usurious rate An interest rate based on unlawfully high interest. Also, the act or practice of lending money at high interest.
Usury Illegal and excessive interest.

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V

V (Variable) IF the letter V is after the APR on your interest rate that means that is it variable and subject to change.
VA loan A mortgage that is guaranteed by the Department of Veteran’s Affairs and made available to a borrower with a low down payment.
Vacation home Vacation home is a second residence that’s used by the owner only periodically.
Valuable consideration Valuable consideration is a legal concept that refers to something of worth that underlies an agreement. For a contract to be valid, there must be valuable consideration, meaning that there must be some value associated with the obligations described in the contract. An example of an arrangement that lacks valuable consideration would be a contract obligating one party to give his house to another party for nothing in return.
Value averaging Value averaging is an investment strategy whereby the investor makes periodic contributions according to a monthly value growth target. Say, for example, that an investor’s target is to build the account value by $1,000 quarterly. After one quarter, the account has grown by $800. The investor, therefore, would contribute another $200 to the account to reach the $1,000 goal. This strategy leads the investor to purchase more when values are decreasing, and less when values are increasing.
Variable death benefit Variable death benefit is a type of payment made to an insured’s beneficiary following the insured’s death. The exact amount of a variable death benefit is dependent upon how the investment component of the insurance policy performed.   Where the performance is sufficient, an additional amount is added to the insured’s guaranteed, minimum death benefit.
Variable interest rate An interest rate which fluctuates up and down based on the rate index.
Variable rate mortgage A mortgage in which the interest rate is changed periodically based on a financial index. Also referred to as an adjustable-rate mortgage.
Vehicle identification number Vehicle identification number, or VIN, is a unique series of characters assigned to an automobile by the manufacturer. Since 1980, VINs have been standardized to be 17 characters in length.
Vendor financing Vendor financing is a loan made by a company to its customers; loan proceeds are used by the customer to buy products or services from the company that made the loan. Companies that offer vendor financing can increase sales and earn interest. Generally, vendor financing is slightly more expensive than bank financing.
Vendor take-back mortgage Vendor take-back mortgage is a first or second purchase mortgage that is financed by the home seller. If the buyer doesn’t qualify for a traditional mortgage, the seller can finance part or all of the purchase to facilitate the sale. Generally, a vendor take-back mortgage is priced below market value so that it’s affordable for the buyer.
Verbal agreement A verbal agreement is an arrangement made between two or more parties that’s not backed by written documentation. Verbal agreements are legally valid where their existence can be proven. Unfortunately, the lack of supporting documentation makes verbal agreements very difficult to enforce.
Verification of deposit A document signed by the borrower’s financial institution verifying the balance of the applicant’s financial accounts.
Verification of employment A confirmation that the loan applicant is being truthful about where he or she works and their income.
Veterans administration A government agency that guarantees mortgage loans given to eligible veternas to protect the lenders against loss.
Viager Viager is a real estate financing arrangement similar to a reverse mortgage. A homeowner sells his home to another party, who pays an immediate down payment and regular monthly payments. The seller lives in the home as long as he chooses. When he moves or dies, the other party takes physical possession of the home. This arrangement is also called a reverse annuity mortgage or charitable remainder trust.
Viatical settlement Viatical settlement is the purchase of another person’s life insurance policy benefits at a discount off face value. When the insured dies, the one who purchased the policy receives the full death benefit, thus realizing a gain on the transaction.
VIN VIN, or Vehicle identification number, is a unique series of characters assigned to an automobile by the manufacturer. Since 1980, VINs have been standardized to be 17 characters in length.
Vintage Vintage is a term that’s used in the mortgage-backed security (MBS) industry, referring to the time period during which a mortgage was funded. Certain vintages of mortgage loans have similar characteristics pertaining to default risk, prepayment rate, etc. MBSs that are backed by vintages known to be less risky trade at a premium.
Virus Virus is a software program that, once installed, replicates itself and corrupts data within one’s computer.   Viruses may be attached to another program that appears to be harmless; the virus gains entry to the computer when this other program is run.
VISA VISA is an electronic payments network. Many credit cards carry the VISA logo, which signifies that the card is almost universally accepted. Merchants who agree to accept VISA payments will accept any card that carries the VISA logo.
Vishing Vishing is scam that incorporates a call-in system where the consumer is directed to provide personal information, such as bank account numbers or Social Security number. The consumer may be initially contacted by email or by phone, with a message that her account needs urgent attention.
VITA VITA stands for Volunteer Income Tax Assistance. It’s an IRS program that provides free tax return preparation assistance to low- to moderate-income households.
Voluntary claim A legal claim against property for payment of a debt and placed upon the property with the consent of the owner.
Voluntary compliance Voluntary compliance is the philosophical principle that people will follow the rules honestly. The U.S. tax system is based on voluntary compliance, in that taxpayers are expected to report their tax information on time and in accordance with tax law. Therefore, not every tax return is thoroughly reviewed for compliance.
Voluntary lien A voluntary lien is a claim placed on property that results from an unfulfilled obligation; the voluntary descriptor means that the claim was filed with the property owner’s consent.
Volunteer Income Tax Assistance Volunteer Income Tax Assistance, or VITA, is an IRS program that provides free tax return preparation assistance to low- to moderate-income households.
Voucher Voucher is a document that can be redeemed by the holder for a certain value, either in money or goods, as specified on the document itself.

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W

Wage assignment Wage assignment is a clause in some loan agreements that gives the lender the right to deduct payments from the borrower’s wages if the borrower defaults. When the borrower agrees to this clause, he’s essentially using his future earnings as collateral for the loan.
Waiver The intentional action of giving up one’s right’s and claims.
Walk away lease A common car lease also known as a closed-end lease. The lessee may return the car at the end of the lease term, pay any end-of-lease costs, such as the disposition fee, and the lease agreement is over and not be responsible for the difference of the actual value of the car.
Walk through A buyer’s final inspection of a property before the sale is finalized, usually on the day of closing or the day before.
Walk-away lease Walk-away lease, also known as a closed-end lease, is an agreement that allows one party to use a second party’s property temporarily, without any obligation to purchase the property at a later date. Walk-away leases are common in auto leasing, because they provide the lessee with the option to return the car at the end of the lease arrangement.
Walk-through Walk-through, in a real estate sale, is the buyer’s final property inspection prior to the close of the transaction.
Wall Street Journal prime rate The wavering interest rate as posted daily in the Wall Street Journal which is derived from several banks to arrive at its number.
Warehouse lending Warehouse lending is the practice of offering revolving credit to loan originators, who draw money to fund mortgage loans.   The originator repays those funds when the mortgage is sold on the secondary market.
Warranty A warranty is a guarantee made by a manufacturer or reseller that a product sold will perform as stated. Warranties will specify conditions under which the manufacturer or reseller will make repairs or cover the cost of necessary repairs, should the product not perform as promised.
Warranty deed See quitclaim deed.
Wash sale When shares of a fund are sold at a loss and shares of the same security are purchased within 30 days before or after. You cannot deduct losses from a wash sale.
Wealth management Wealth management is a comprehensive planning service that incorporates all aspects of personal finance, such as tax planning, estate planning, investment planning, legal planning, etc.
Wellness program Wellness program is a set of preventative care services or coverages offered by a health insurance provider. Annual physicals, vaccinations, and nutrition planning might be included in a provider’s wellness program.
White collar White collar describes the class of employees who perform intellectual work rather than manual labor. White collar workers usually earn higher salaries, but this distinction has become less pronounced over time.
Will A will is a legally binding document in which an individual specifies how he would like his property distributed after his death. The will can also specify a guardian for dependents and an executor for the estate.
Will variation Will variation is the right of a decedent’s spouse and children to contest the decedent’s will. The spouse and/or children must make the argument that the decedent’s will doesn’t adequately provide for them. It’s rare that contesting a will actually results in someone getting a larger share of the estate.
With approved credit – WAC With approved credit, or WAC, is a condition placed on a sale transaction that requires the buyer to have sufficient credit. A company that leases equipment, for example, would run a credit check prior to executing to ensure that the lessee meets minimum credit requirements.
Withdrawal plan Withdrawal plan is a service offered by some mutual fund accounts.   An individual who signs up for a withdrawal plan will receive periodic income payments out of her account. Withdrawal plans are often used to create a regular stream of retirement income.
Withholding Withholding is a method of paying taxes, where funds are automatically deducted from wages. Withheld funds are sent directly to the taxing authority, and counted as partial payment towards the individual’s tax liability for that year.
Withholding allowance Withholding allowance is a value that a taxpayer claims on the IRS W-4 Form.   The allowance value, in part, determines how much money is withheld from the taxpayer’s earnings. A higher allowance means a lesser withholding rate. Typically, a taxpayer can claim one allowance for herself, one for her spouse, and one for each dependent.
Withholding tax Withholding tax is the amount of money that’s taken out of an employee’s wages and sent directly to a taxing authority. These withheld amounts count as partial payment toward the taxpayer’s tax liability for the year. Withholding tax can also be an assessment charged against a non-resident’s investment and income.
Work study Need-based financial aid award in which the federal government subsidizes part of the cost of a student’s wages at a job usually on campus.
Working capital loan Working capital loan is a short-term debt provided to a business to bridge the gap between buying or manufacturing product and actually receiving customer payments for sold product.
Workout A mortgage in which basic terms: interest rate, term and monthly payment, have been altered to prevent a foreclosure.
Workout assumption Workout assumption is the transfer of an existing mortgage from an at-risk borrower to a qualified third-party. A workout assumption is usually only a consideration when a borrower has serious financial problems that aren’t likely to be resolved. The lender must approve a workout assumption.
Work-study Work-study is a type of financial aid program available to college students who demonstrate need. Basically, the student is given a part-time job on campus to help cover education-related expenses; the federal government often subsidizes part of the student’s wages.
Worm A worm is a malicious computer program that can replicate and distribute itself via a network. Worms can run themselves, while viruses rely on a host program.
Wraparound loan A wraparound loan is a refinancing technique used with mortgages. A lender makes a new loan to the homeowner, and places the loan in a subordinate position to the existing first mortgage. After funding (rather than at funding), the borrower uses the proceeds from the new loan to pay off the old first mortgage.
Wraparound mortgage A consolidation of balances on all mortgages into one loan.
Writ Writ is a written, binding order issued by a judge, judicial officer or court.
WSJ prime rate WSJ prime rate is a consensus prime rate published by the Wall Street Journal, which obtains the information via a survey of financial institutions. The prime rate is a benchmark lending rate that generally remains 3 percentage points higher than the fed funds rate.

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Y

Yield curve A yield curve is a graph that shows the relationship between interest rates and time.
Yield spread premium Yield spread premium is the difference between the interest rate a borrower pays on a mortgage loan, and the lender’s par rate for which that borrower qualifies. This difference is the broker’s compensation for originating the mortgage. Yield spread premiums are disclosed on the HUD-1 Form.
Yupcap Yupcap is a slang term for a young, educated, working professional who can’t afford to buy a home. Yupcaps have reliable, competitive income, but are kept out of homeownership due to the rising cost of real estate in the U.S.

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Z

Zero balance The wonderful appearance of a zero balance occurs when a borrower has paid of their loans and there is nothing left to repay.
Zero capital gains rate Zero capital gains rate is the 0 percent tax rate that’s applied when an individual sells property in a designated enterprise zone. The existence of the zero capital gain rate is intended to stimulate investment in designated communities.
Zero-down-payment mortgage A zero-down-payment mortgage is a real estate property loan that finances 100 percent of the purchase price. A borrower who funds a zero-down-payment mortgage will be required to purchase private mortgage insurance.
Zero-lot line When a house is built on a lot so that one wall is on the property boundary.
Zeros – Zero-coupon CDs Zeros, or zero-coupon CDs, are time deposits that pay interest at maturity, rather than at regular intervals.
Zone of possible agreement Zone of possible agreement describes the potential common ground between two negotiating parties. Each party in a negotiation should have points on which they will and will not compromise.   The zone of possible agreement encompasses the points on which both sides are willing to compromise.
Zoning Areas that are designated by the local government where certain types of land uses are allowed. An area may be zoned for residential or commercial building.
Zoning ordinances Local laws that establish building codes and usage regulations for properties in a specified area.
Zoning variance When an exception is made in a zoning ordinance by the local government. These are granted on a case by cases basis.

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Joe Cuellar

NMLS 34976
Branch Manager, McAllen
CRM Lending, LLC

The Mortgage Lender You Can Trust