GLOSSARY OF REAL ESTATE TERMS Understanding the Language Adjustable Rate Mortgage (ARM) A mortgage with an interest rate that changes over time in line with movements in the index. ARMs are also referred to as AMLs (adjustable mortgage loans) or VRMs (variable rate mortgages). Adjustment Period The length of time between interest rate changes on an ARM. For example, a loan with an adjustment period of one year is called a one-year ARM, which means that the interest rate can change once a year. Amortization Repayment of a loan in installments of principal and interest, rather than interest-only payments. Annual Percentage Rate (APR) The total finance charge (interest, loan fees, points) expressed as a percentage of the loan amount. Appraisal An estimate of the property’s value provided by a professional appraiser. Assumption of Mortgage A buyer’s agreement to assume the liability under an existing note that is secured by a mortgage or deed of trust. The lender must approve the buyer in order to release the original borrower (usually the seller) from liability. Balloon Payment A lump sum principal payment due at the end of some mortgages or other long-term loans. Buydown Permanent - prepaid interest that brings the note rate on the loan down to a lower, permanent rate. Temporary - prepaid interest that lowers the note rate temporarily on the loan, allowing the buyer to more readily qualify and to increase payments as income grows. 22 Cap The limit on how much an interest rate or monthly payment can change, either at each adjustment ܈ݙ\HYHقH[ܝYK\\\\H[[[وH^Y\&\\]ZY\[XZ[[Y\XZ[Hۂ^[Y[[^Z[[[˂ɔݙ[[ۙ][ۜ[\X[ۜ˂H[Y[]H\K\]Z\[Y[[\X[ۜوB\K\YX]Hو[Z]Y[H[\&\\ݘ[وHH[X\\X[H܈\^[˂\YX]HوX\ۘXH[YH ԕBH[Y[]\X\\BX^[][H[YH[[[[[وHBX\[YY[ܝYK][\ۘ[\K[\\BH[\\H\XZ]YBHۜ[Y\]X\YH^\[܈[ˈ][Y\[\\ڙXY[H^[Y[[[˂\\\X[H\\YH[\[X]HXZ]YX\Y\[\BX\XK[][Y[H[[X[\\H][Y[]X[܈[وH[XZ]Y[^XY]H[[Y[\]܈^\^\[\[K[[ܝYH[\[K[Z]Y[\[H\[\[XH[\ݘ[\[YۙZ[][BHܛHوX[\]Hۙ\\\BHۙ\XZ]\]HH\X[\[][\Hܝ[ۘ]H[\\[\Z[[[ۈ\X\ˈH[]][\[\[HH\\][HۙYXBH[\[܈\XH [܋Z[[H\H\][\Y\˂ۜ[Y\]YX[ۈ\X]B\[[\[[Y[HوB[]Y]\ݙ\Y[\ۜXB܈X[ۜ[Y\H[Z\X\]K܈X\]HXX\HB[[X[X܈X\[[\[\[[X[\[Y\˂[[BHۙ][ۈ]]\H]\ٚYYYܙBHX\[[ˈ܈[[KH[\YܙY[Y[X^HH[[\ۈB^Y\Z[[[[[˂\[ۈ]\BHݚ\[ۈ[YHT\][X\YH^Y\[H[THB^Y]H[\X[HY\H\Y\Y[\[H]^Y]B\[\[H]]H]Z[[[\\]H܈^Y]H[ܝY\ˈ\\[ۈX]\HX^H^K\]]BHܛHو][\Hۙ\\[XHܜܘ][ۈ܈\[\\[]B]HH\H[ܘ[\[HY\Z\BYX[وY]\HX\\܈[Z[\\[[Y[˂Ԑ\YYY\Y[X[\B\YYYH\]\HHY[X\قH][ۘ[\X][ۈوX[ܜ]B]HYX\^\Y[H\HX[Y\[]H\]Y\]Z\Y\Y[X[]\[ۈ\\˂Ԕ\YYY\Y[X[XX[\\\Yۘ][ۈ\Xۚ^Y[\K]YB\H[Xو^[[H[\Y[X[[\[\HY\\Yۘ][ۂ]\Y[H\Y[X[X[\]B[\[\KX][H\\\ۈوH^Y\&\\[\܈\ܛ܈]YX]B[YK[H\\\ۈوH^Y\&\ۙ]\HX\܈\ܛ܈]YX]H[YKH\][\\[][HXۙ][\[X][˂LMZ\\Hˈ[Y\\Y[[\[Z\[H\ܝH[\\وHZ\\[X[H\]X[ܝ[]HX\]YHHXYX\Hوˈ[[\[H[[\\HY\\Y\XHX\ۙYH[[\X[\]HˈX[\]HY[Y[X]Y][[\[Z\\H[\[[X܈[\\X]\[\H[\YY\و[[\[Z\