Finance Glossary - Total 2202 terms explained

On this page you will find the first 1101 finance terms in our glossary archive described and explained, this part include terms from A - J starting with number terms.

The second part of our glossary archive can be found HERE and include letter from K-Z.

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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.
   
A Back to top
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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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. 
   
D Back to top
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. 
   
E Back to top
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 (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.

National Rates

Loan Type Today +/-
30 yr fixed 3.72
15 yr fixed 3.04
5/1 ARM 3.05

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