Mortgage Glossary

ACCELERATION CLAUSE:
A clause in a mortgage or loan. If the borrower fails to live up to her obligations under the mortgage, the lender has the legal right to demand that the full principal of the mortgage may become due and payable immediately upon the failure.

ACCRUED:
An adjective describing something that has come into existence but has not yet been claimed by or distributed to its rightful owner.

ACCRUED INTEREST:
Interest which has already been earned but has not yet been paid.

ACT OF GOD:
When used in insurance policies, an event caused by natural forces such as rain, lightning, floods or earthquakes which results in damage to property or chattels.

ADC LOAN:
A loan that finances the three major phases of a land development project: (i) acquisition, (ii) development and (iii) construction.

ADDITIONAL PRINCIPAL PAYMENT:
A one-time or lump-sum payment made by a borrower in addition to the regular payments on a loan or mortgage which reduces the principal owing on the debt.

ADJUSTABLE RATE MORTGAGE (ARM):
Also known as a Variable Rate Mortgage, a loan secured against land which has an interest rate that changes according to some outside index -- such as the federal prime rate or the interest rate paid on government bonds -- over the term of the mortgage. The change in interest rate will result in a change in the periodic payments due under the mortgage.

ADJUSTMENT DATE:
Mortgage term usually preceded by the word "Interest" (i.e. "Interest Adjustment Date"). The date soon after the completion of a purchase and mortgage transaction on which the borrower must make a payment of accumulated interest only, usually used to place the periodic payment dates for the mortgage at the first day of the month (i.e. you borrow on March 18, your interest adjustment date is April 1 and your first regular monthly payment is May 1).

ADJUSTMENT INTERVAL:
Also known as Adjustment Period. The period of time (i.e. week, month, year) between changes in the interest rate charged on a adjustable-rate mortgage.

ADJUSTMENT PERIOD:
See Adjustment Interval.

ADVANCE:
Verb: to deliver a portion of money borrowed under a mortgage or loan before the loan instrument requires the money to be delivered.
Noun: the money so delivered.

ALIENATION CLAUSE:
A term of a mortgage which allows the creditor to demand payment in full of principal and interest due upon the sale of the property.

AMORTIZATION:
The preparation of a payment plan for a loan which allows for equal payments to be made to the creditor at consistent intervals over the life of the loan (the amortization period). Each payment covers interest accrued over the interval period with the remainder of the payment being applied to reduce the principal owed. If every payment is made on time and in full over the amortization period, the loan will be completely repaid at the end of the amortization period.

AMORTIZATION SCHEDULE:
The printed table of the payments to be made on an amortized loan showing the date and amount of each payment, the amount of each payment which will be applied to interest and to principal and the balance of principal still outstanding on the loan after the payment is made.

ANACONDA MORTGAGE:
A specific kind of mortgage. Contains a clause that states that it secures all debts owed to the mortgagee by the mortgagor and applies to rules of the mortgage to all such debts. Clause is also known as a Mother Hubbard clause.

ANNUAL DEBT SERVICE:
The total amount required to service a loan in a given year.

ANNUAL LOAN CONSTANT:
Ratio of Annual Debt Service to original principal of the loan. Also known as a mortgage constant.

ANNUAL MORTGAGOR STATEMENT:
Document sent by the lender to the mortgagor each year which sets out amounts paid for principal, interest and taxes in the given year and the amount still owing on the principal of the mortgage at the end of the year.

ANNUAL PERCENTAGE RATE (A.P.R.):
A rate designed to allow for the comparison of one type of loan to another. The annual cost of borrowing under a given form of loan (includes in the calculation compounded interest, cost of borrowing etc.). Required to be disclosed by the lender under the American Truth in Lending Act, Regulation Z.

APPLICATION:
A form filled out in order to allow a lender to consider a person for a mortgage or loan. Will contain personal and financial and personal information on the applicant.

APPLICATION FEE:
The fees the lender charges the applicant. May include costs of a property appraisal and a credit report on the applicant. May be payable by applicant even if loan is not approved.

APPRAISAL:
An estimation of the value of a property on a certain date given by a qualified person, usually after an inspection of the property.

APPRAISAL PRINCIPLES:
Elements to be considered by an appraiser in appraising the value of a property, such as competition, supply and demand.

APPRAISAL PROCESS:
A standardized approach to appraising a property, to allow for accuracy and consistency.

APPRAISAL REPORT:
Documentation to support an appraisal of a property. Varies in length but sets out elements considered, positive and negative aspects of property etc.

APPRAISED VALUE:
The estimated market value of a property on a given date, given by a qualified person as a result of an inspection of the property and a consideration of other market forces.

APPRAISER:
A professional who has been trained to assess the value of property.

APPROACHES TO VALUE:
Different methods by which appraisers estimate the value of a property. Include: (1) cost approach, (2) comparison approach, and (3) income approach.

ARREARS:
Money which is not paid when due, under a payment plan or amortization schedule. Could lead to enforcement of loan agreement by lender

ASSIGN:
To transfer interest in a property, contract, right etc..

ASSIGNEE:
The person to whom an interest is transferred. An assignee of an Agreement of Purchase and Sale may buy the property and enforce the contract in the same fashion as the original party.

ASSIGNMENT:
The transfer of any right, claim or interest to another person or corporation. Often used to refer to the transfer of a mortgage from one lender to another. Also a noun describing the document which represents the assignment of the right etc.

ASSIGNOR:
The person who assigns a right or interest to another person.

ASSUMABLE MORTGAGE:
A mortgage that can be taken over ("assumed") by the buyer when a home is sold. If interest rates have risen, an assumable mortgage at a low rate may prove a selling point for the property.

ASSUMPTION CLAUSE:
The paragraph in the mortgage which sets out the borrower's right to have the mortgage assumed by a purchaser.

ASSUMPTION FEE:
A charge levied by the lender (usually against the party assuming the mortgage) for the privilege of assuming a mortgage. May be a fixed amount or a percentage of outstanding principal on the mortgage at the time of the assumption.

ASSUMPTION OF MORTGAGE:
The agreement of a purchaser to take on personal liability for a mortgage already registered on title to the property and to make payments under the mortgage. Purchaser takes the place of the vendor in the contract with the lender.

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