Glossary

A mortgage bond is a corporate debt instrument that's supported by real estate property collateral. Bondholders have a claim on the collateral property if the corporate borrower defaults.

A 30-year fixed mortgage is a mortgage loan that keeps the same rate of interest throughout the loan's 30-year life. In most cases, fixed-rate mortgages are fully amortizing, so that the debt will be paid off at the end of the 30-year term.

A basis point is 1/100th of 1 percent. The basis point is often used in reference to interest rates. If the Fed decreases the prime rate from 7.50 percent to 7.25 percent, the rate is said to have gone down 25 basis points.

A bond is a loan that's sold in shares as a security. Corporations and government entities sell bond shares to raise money for special projects, expansion, or simply to cover budgeted expenses. One who purchases a bond is called the bondholder. The terms of the bond specify when and how the bond issuer will repay the principal to the bondholder.

1-year LIBOR (London Interbank Offered Rate) rate is the stated rate of interest at which banks in the London wholesale money markets may borrow funds from one another for one year. The British Bankers' Association resets the 1-year LIBOR rate daily, based on an average of global interbank deposit rates. LIBOR rates tend to follow global interest rate trends and are therefore frequently used as the benchmark index for adjustable-rate mortgages.

A table of interest rates being paid on debt that is used to determine interest-rate changes for adjustable-rate mortgages and other variable rate loans such as credit card debt.

The ARM is a loan secured on property whose interest rate and monthly repayments vary over time. The variations in ARM usually correspond and depend on the flucatuations of a pre-determined index. Due to its nature, it is also known as the Variable Rate Mortgage or the Negotiable Rate Mortgage.

See further Adjustment date, Convertible ARM, Fixed rate mortgage

A 30-year FHA mortgage is a mortgage loan insured by the Federal Housing Administration (FHA). The mortgage keeps the same rate of interest throughout the 30-year term. FHA loans are designed for low- to moderate-income borrowers who are unable to make a large downpayment.

It is the asset that acts as the guarantee in the repayment of the loan. The borrower may risk losing this asset if he is unable to repay his loan according to the terms of the loan contract or the mortgage or the trust deed.

A 401(k) plan is a qualified retirement savings plan established by employers for employees. Employees may make pretax salary contributions, or deposits, into the plan, and the employer may partially match these contributions. Investment earnings grow tax-free within the plan until funds are withdrawn after the accountholder reaches the age of 59 1/2.

Debt accrued through the use of credit cards

An adjustable rate is a rate of interest paid on outstanding debt (often a mortgage) that can fluctuate. Generally, adjustable rates are defined relative to an underlying variable index, as in 30-day LIBOR plus 1.50%.

A number that reflects the credit history as outlined in that person's credit report. A lender will calculate this number using a computer system as part of the process of assigning interest rates and terms to the loans they make. The higher the number, the better the terms that a lender will offer. A good credit score is around 720. It is possible to raise your credit score over time and by appealing certain items that appear on your report. It is smart for consumers to monitor and track their credit reports to ensure that the information is correct and to make sure that the items that they have disputed do not remain on their reports.

CD Rates are the rates paid on Certificates of Deposit.

The discount rate, in banking, is the interest rate charged to financial institutions when they borrow short-term funds directly from the Federal Reserve Bank. In finance, the discount rate is a factor in the relationship between the present and future values of cash. For example, a bond that's purchased for $60 now, and pays $100 in one year, has a discount rate of 40 percent; in other words, the future payment of $100 can be purchased now for $60, i.e., at a discount of 40 percent.

A payment to pay of part of a debt or a loan. This payment is usually periodical. Given that the monthly payment exceed the interest payment for a period, the debt balance or remindning loan balance, is decreasing.  In some cases there is a anuity payment plan, that is there is equal payments per period. In this case the amortization part of a payment is the part of the payment that is used to pay off a part of the debt. The remaining part of the payment for the period is paid for the interest accrued on the loan. A loan is amortized over a period in order to have it paid off (fully or partly) over the loan period.  In you payment plan for a mortgage or loan you will find the amortization part, as well as interest part, per month (or period). In the case with fixed mortgage interest rates the amortization part is fixed and predictable. In the case with adjustable mortgage interest rates, the total payment may vary over time, as may the actual amortization in some cases depedning on type of mortgage or loan. However, typically there is a amortzation plan that let you know exactlu how large your remaining debt will be at the end of each month (period). See further Amortization Schedule and Amortization Term.

The actual value of a mortgage or note borrowed or the balance left of a loan not taking into account any interest.

A borrower is an individual or entity that receives loaned funds or property and is required to return those funds or property at some future date. In the financial sense, a borrower is one who draws money from a credit facility, and is contractually obligated to pay back the principal plus interest.

One point equals one percent of a mortgage. There are origination points and discount points. Origination points help cover the loan expenses for the lender and discount points help borrowers by reducing interest rates.