Mortgage terms to know
(ARM): A loan with changeable rates and terms.
Annual percentage rate (APR): A mortgage’s yearly interest rate. The APR represents the actual annual cost of credit over the life of the loan, including interest, service charges, point and loan fees.
Assumable mortgage: A mortgage that can be taken over by another buyer, without having the balance on the mortgage come due.
Balloon mortgage: Amortgage with monthly payments, followed by a lump sum due at the end of the loan term.
Cap: A limit placed on adjustable-rate mortgages to protect the borrower from large interest-rate increases. Also, a limit on the amount that an interest rate or a monthly payment can increase during the adjustment period or the life of a loan.
Conventional loan: A fixed-rate, fixed-term mortgage loan not obtained under a government-insured program.
Fixed-rate mortgage: A mortgage whose interest rate does not change during the life of the loan.
Index: A statistic that indicates current economic or financial conditions. Adjustable-rate mortgages are based on the movement of a specific independent index.
Mortgage broker: A broker who, for a fee, places loans with different investors.