An Adjustable Rate Mortgage, or ARM, is a mortgage where the interest rate is adjusted periodically based on an index. It is also known as the renegotiable rate mortgage, the variable rate mortgage or the Canadian rollover mortgage.
Amortization is the gradual reduction of a debt by periodic payments of interest and principal that are large enough to pay off a loan at maturity. The loan is repaid through regular, monthly payments of principal and interest paid for a predetermined amount of time.
The annual cost of a loan to a borrower. Like an interest rate, the APR is expressed as a percentage of the loan amount. Unlike an interest rate, however, it includes other charges or fees to reflect the total cost of the loan. The Federal Truth in Lending Act requires that every consumer loan agreement disclose the APR in large, bold print. Since all lenders must follow the same rules to ensure the accuracy of the APR, borrowers can use the APR as a good basis for comparing the cost of loans.
An appraisal is a written analysis of the estimated value of a property, as prepared by a qualified appraiser. A fee is typically charged to perform a real estate appraisal because it can be time-consuming. An appraisal of an auto is usually not necessary because auto dealers, sellers and buyers all have quick access to the market value of autos.
An assumable mortgage is a mortgage that allows you to take over a mortgage on a home you are buying or allows a buyer to take over your mortgage if you are selling your house. The advantage of this is that you assume a mortgage that has a lower interest rate than current rates, and you avoid high closing costs.