The adjustment interval refers to the frequency at which the interest rate of an adjustable-rate mortgage (ARM) is recalculated. It plays a crucial role in determining how often a borrower's mortgage payments may change.
A Budget Mortgage is a mortgage structure which includes monthly payments for taxes and insurance, in addition to the standard interest and principal. This type of mortgage ensures that homeowners set aside the necessary funds for property tax and insurance premiums.
A Burned-Out Tax Shelter refers to a real estate investment that was once advantageous for providing large income tax deductions but has lost its tax-sheltering benefits over time due to the reduction and eventual nil in depreciation deductions and the decrease in interest deductions as mortgage payments increasingly cover the principal.
Escalation clauses and escalation mortgages are tools commonly used in real estate to adjust costs and payments in accordance with specific metrics, such as inflation or interest rates, to accommodate changing economic conditions.
The Financial Obligation Ratio (FOR) is a metric compiled and reported by the Federal Reserve Board that tracks the household financial burden for the United States. The ratio represents the percentage of disposable income used for debt payments, including property taxes, insurance premiums, lease payments, and mortgage and credit card debt payments.
The fully indexed rate in the context of adjustable-rate mortgages (ARMs) refers to the interest rate determined by the sum of the current value of an index and a margin applied to the loan. This rate dictates the monthly mortgage payments after initial rate periods and caps are considered.
A grace period is a set duration of time after a deadline during which a borrower or debtor can perform an obligation without facing any penalties or being considered in default.
A graduated-payment mortgage is a home loan characterized by low initial monthly payments that gradually increase over time according to a predetermined schedule.
A Growing Equity Mortgage (GEM) is a type of fixed-rate mortgage where monthly payments increase over time according to a set schedule, leading to faster repayment and reduced interest cost over the life of the loan.
A mathematically derived factor from compound interest functions indicating the level periodic payment required to fully pay off a $1.00 loan over a certain period.
An Interval Adjustment Cap refers to a limit on the amount a loan's interest rate can increase or decrease during each adjustment interval on an adjustable-rate mortgage (ARM). This cap helps borrowers predict and manage their mortgage payments by restricting rate fluctuation within set periods.
An interest-only loan is a type of mortgage where the borrower is obligated to pay only the interest on the principal balance for a set period, usually between 5 to 10 years.
A late charge or late fee is a penalty that businesses or lenders impose on customers who fail to make a payment by the specified due date, including any applicable grace period. These fees can be quite substantial, sometimes up to 5% of the regular payment amount, and are meant to incentivize timely payments.
The Loan Constant, also known as the Mortgage Constant, is used to analyze the burden of debt repayment on a property and measure its ability to generate earnings sufficient to cover mortgage payments.
P&I, or Principal and Interest, payments refer to the periodic payments made on a mortgage or loan that include both the loan principal and the interest accrued. These payments are common in various types of loans, including mortgages, auto loans, and personal loans.
A contractual limit on the percentage amount of adjustment allowed in the monthly payment for an adjustable-rate mortgage at any one adjustment period, which can lead to negative amortization if the payment does not cover the interest due.
A Pledged Account Mortgage (PAM) is a type of home purchase loan where the borrower sets aside a sum of cash in a pledged account that is used to supplement mortgage payments in the initial years, reducing the payment amount during this period.
Principal, Interest, Taxes, and Insurance (PITI) are the four components typically included in a single monthly mortgage payment on an amortizing loan.
The reinstatement period is a phase in the foreclosure process during which the homeowner has an opportunity to stop the foreclosure by paying the money that is owed to the lender.
A repayment plan is an agreement between a lender and a delinquent borrower in which the borrower agrees to make additional payments to pay down past due amounts while continuing to make regular scheduled payments.
Spendable Income refers to the amount of cash flow that property owners receive after all operating expenses, mortgage payments, and taxes have been deducted.
