glossary



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1031 Exchange

a tax-deferred exchange of real estate employed to offset or even avoid capital gains tax.

15-Year Fixed Mortgage

a fixed-rate home loan that has half the typical term of 30 years

203k Loan

an FHA loan that allows you to finance home improvements and permanent financing in a single mortgage loan.

3/1 ARM

An ARM that is fixed for the first three years (36 months) of the loan term before becoming annually adjustable.

5/1 ARM

An ARM that doesn’t have its first adjustment until year six, and then adjusts once annually thereafter

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Adjustable-Rate Mortgage (ARM)

a mortgage with a variable interest rate, which adjusts monthly, biannually, or annually. Option-arms and hybrid mortgages are also considered adjustable-rate mortgages

Alt-A Mortgage

a home loan that isn’t prime or subprime, but somewhere in the middle

Amortization

the way a loan is paid off over time in installments, detailing how much goes toward interest, and how much is paid toward principal

Annual Percentage Rate (APR)

the actual interest rate you pay on your mortgage, which factors in fees, points, and other costs associated with the loan

Assumption

the act of assuming responsibility for the payment of a mortgage lien

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