Glossary of Real Estate Terms
Adjustable-Rate Mortgage (ARM)
An Adjustable-Rate Mortgage (ARM) is a type of loan whose prevailing interest rate is tied to
an economic index (like one-year Treasury Bills), which fluctuates with the market. The three
most popular types of ARMs are one-year ARMs, which adjust every year, three-year ARMs,
which adjust every three years, and five-year ARMs, which adjust every five years. When the
loan adjusts, the lender tacks a margin onto the economic index rate to come up with your loan's
new rate. ARMs are considered riskier than fixed-rate mortgages, but their starting interest rates
are generally lower than a longer-term rate, and in the past five to ten years, people have done
very well with them..
Amortization is a payment plan which enables the borrower to repay his debt gradually through
monthly payments of principal and interest. Amortization tables allow you to see exactly how
much you would pay each month in interest and how much you repay in principal, depending on
the amount of money borrowed at a specific interest rate.
Annual Percentage Rate (APR)
The Annual Percentage Rate (APR) is the total cost of a loan, expressed as a percentage rate of
interest, which includes not only the loan's interest rate, but factors in all the costs associated
with making that loan, including closing costs and fees. The costs are then amortized over the
life of the loan. Banks are required by the federal Truth-in-Lending statutes to disclose the APR
of a loan, which allows borrowers a common ground for comparing various loans from different
The amount of cash derived over a certain period of time from an income-producing property.
The cash flow should be large enough to pay the expenses of the income producing property
(mortgage payment, maintenance, utilities, etc.).
The meeting between the buyer, seller and lender or their agents where the property and funds
legally change hands, also called settlement. Closin