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Glossary
Adjustable Rate Mortgage: The interest rate on an ARM is not fixed for the life of the loan. These mortgages adjust periodically based on an index that changes with market conditions. The rate of interest is the sum of the index plus a margin. Most ARMs have periodic interest rate and payment caps, as well as a life cap.
ABA Routing Number: A unique number that identifies and directs electronic deposits and credits to the proper financial institution. This number printed in special ink for security purposes, precedes the account number printed at the bottom of a check. It is most often requested by employer payroll offices to arrange for direct deposit and by merchants which accept checks online or over the phone.
Annual Percentage Rate: The cost of credit expressed as an annual rate. It must be calculated by using a formula set by federal law and disclosed to the borrower to aid in comparing different credit plans. All finance charges imposed by the lender are included in this calculation.
Annual Percentage Yield: The amount of interest earned on a deposit account (checking, savings, CDs, IRAs) including the effect of interest compounding, assuming funds remain in the account for one year
Appraisal: A written analysis of the estimated value of a property prepared by a qualified appraiser.
ATM: Acronym for automated teller machine.
Borrower: One who applies for a loan and is responsible for repaying the loan
Cash advance: A cash loan from a financial institution; obtained with a credit card (i.e. Visa) or a check that accesses a line of credit
Closing: A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs. Also, called "settlement."
Certificate of deposit: An instrument that is issued by the credit union in the name of the member stating that a certain sum of money is on deposit and that the member agrees to keep this money at the credit union for a certain period of time. CDs vary widely in amount and term, and the rate of interest depends on both of these factors.
Credit Union: A cooperative group that makes loans to its members at low rates of interest.
Closing costs: Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. 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.
Condo: A real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas.
Credit report: A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.
Credit union: A cooperative group that makes loan to its members at low rates of interest.
Direct Deposit: Electronic deposit of wages or benefits, such as pension or social security, into a personal account
Dividend: Funds paid to members based on account size and rates declared regularly (monthly, quarterly or annually) by the board of directors for various types accounts.
Down payment: The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage. Down payments are usually 5% to 20% of the sales price on conventional loans.
Equity: The monetary value of a property or business beyond any amounts owed on it in mortgages, claims, liens, etc.
Escrow: A contract, deed, bond, or other written agreement deposited with a third person, by whom it is to be delivered to the grantee or promisee on the fulfillment of some condition.
Field of membership: This is the groups of people who are eligible to join a particular credit union
Finance charge: Interest or a fee charged for borrowing money or buying on credit
First mortgage: A mortgage that has priority as a lien over all other mortgage
Fixed rate: A rate of interest charged for a loan or paid to an interest-bearing deposit account that does not vary for the term of the loan or deposit.
Grace period: The length of time between the use of credit to make a purchase and the start of interest on the amount charged.
Insufficient funds: When a member's account does not contain enough money to cover a check presented for payment: also referred to as non-sufficient funds (NSF)
IRA(individual retirement account): An investment account in which a person can set aside income up to a specified amount each year and usually deduct the contributions from taxable income, with the contributions and interest being tax deferred until retirement.
Interest rate: The rate paid on interest-bearing account, such as savings, CDs, and some checking accounts.
Loan to value ratio: The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.
Margin: The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.
Maturity Date: The date on which a share certificate, bond or other instrument comes due.
Mortgage: A legal document that pledges a property to the lender as security for payment of a debt.
Mortgage insurance: A contract that insures the lender against loss caused by a mortgagor's default on a government mortgage or conventional mortgage. Mortgage insurance can be issued by private company or by a government agency such as the Federal Housing Administration (FHA)
Principal balance: The outstanding balance on a loan.
Overdraft: When the amount of a paid check or withdrawal exceeds the available balance in a checking account
Refinancing: The process of obtaining a new mortgage, usually at a lower rate, to repay and replace an existing mortgage
Stop Payment: An order to the credit union not to honor the payment of check after it has been delivered but before it has been cashed.
Uncollected funds: Checks deposited in a bank account that have not yet cleared or have been paid by the bank or banks on which the checks have been drawn
Wire Transfer: A transaction that electronically transfers money from one financial institution to another. |
Know your terms. Don't know your amortization from your ARM? No worries! We've assembled a list of commonly used financial terms and their definitions for your reference.
