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1-year ARM - An adjustable-rate mortgage (ARM) that has an initial interest rate for one year, and thereafter has an adjustment interval of one year. The adjustment is based on a comparison of interest caps and the indexed rate. 

3/1 ARM - An adjustable-rate mortgage (ARM) that has an initial interest rate for three years, and thereafter has an adjustment interval of one year. The adjustment is based on a comparison of interest caps and the indexed rate. 

5/1 ARM - An adjustable-rate mortgage (ARM) that has an initial interest rate for five years, and thereafter has an adjustment interval of one year. The adjustment is based on a comparison of interest caps and the indexed rate.

7/1 ARM - An adjustable-rate mortgage (ARM) that has an initial interest rate for seven years, and thereafter has an adjustment interval of one year. The adjustment is based on a comparison of interest caps and the indexed rate.

10/1 ARM - An adjustable-rate mortgage (ARM) that has an initial interest rate for 10 years, and thereafter has an adjustment interval of one year. The adjustment is based on a comparison of interest caps and the indexed rate. 

80-10-10 loan - A combination of an 80 percent loan-to-value first mortgage, a 10 percent down payment and a 10 percent home equity loan. It would eliminate the need for private mortgage insurance, and for expensive homes it could eliminate the need for a jumbo mortgage by reducing the first mortgage to the conventional $252,700 limit ($379,050 in Alaska and Hawaii).

80-15-5 loan - A combination of an 80 percent loan-to-value first mortgage, a 5 percent down payment and a 15 percent home equity loan. It would eliminate the need for private mortgage insurance, and for expensive homes it could eliminate the need for a jumbo mortgage by reducing the first mortgage to the conventional $252,700 limit ($379,050 in Alaska and Hawaii).

Abstract of title - A written history of all the transactions that bear on the title to a specific piece of land. An abstract of title covers the time from when the property was first sold to the present. Used by the title company to produce a title binder.

Acceleration clause - The section of a mortgage document that allows the lender to speed up the payment date in the event of a default, making the entire principal amount due.

Acre - An area of land that is 43,560 square feet.

Adjustable Rate Mortgage, or ARM - Mortgage in which the rate of interest is adjusted based on a standard rate index. Most ARMs have caps on how much the interest rate may increase.

Adjustment interval - How often the loan's rate can be changed. 

Alternative mortgage products - 7/23 and 5/25 mortgages with a one-time rate adjustment after seven years and five years, respectively. Also known as a hybrid mortgage or two-step mortgage.

Amortization schedule - A timetable for the gradual repayment of a mortgage loan. An amortization schedule indicates the amount of each payment applied to interest and principal, and also the remaining balance after each payment is made.

Amortization term - The amount of time required to amortize (repay) a mortgage loan. The amortization term is usually expressed in months. A 30-year fixed-rate mortgage, for example, has an amortization term of 360 months. 

Annual Percentage Rate (APR) - A standardized method of calculating the cost of a mortgage, stated as a yearly rate which includes such items as interest, mortgage insurance, and certain points or credit costs.

Appraisal - A written report by a qualified appraiser estimating the value of a property.

Appraised value - An opinion of a property's fair market value, based on an appraiser's inspection and analysis of the property. 

Appraiser - A person qualified by education, training and experience to estimate the value of real property.

Appreciation - An increase in the value of a property due to changes in market conditions or improvements to the property.

ARM - See Adjustable rate mortgage.

Assessed value - The value of a property as determined by a public tax assessor for the purpose of taxation.

Assumable mortgage - A mortgage that a buyer can assume, or take over, from the seller of the property.

Balloon mortgage - A loan that has regular monthly payments which amortize over a stated term but call for a final lump sum (balloon payment) at the end of a specified term, or maturity date, such as 10 years.

Basis points - 1/100th of 1 percent. If an interest rate changes 50 basis points, for example, it has moved 1/2 of 1 percent.

Binder - See title binder.

Biweekly mortgage - A mortgage that schedules payments every two weeks instead of the standard monthly payment. The 26 biweekly payments are each equal to one-half of the monthly payment. The result for the borrower is a substantial reduction in interest payments because the mortgage is paid off sooner. See also prepayment plan.

Bridge loan - A loan that "bridges" the gap between the purchase of a new home and the sale of the borrower's current home. The borrower's current home is used as collateral and the money is used to close on the new home before the current home is sold. Some are structured so they completely pay off the old home's first mortgage at the bridge loan's closing, while others pile the new debt on top of the old. They usually run for a term of six months.

Broker - See mortgage broker.

Broker premium - Premium paid to mortgage broker as the "middleman" in the mortgage process between the lender and the borrower. Lenders offer brokers wholesale rates; brokers add a surcharge to cover the cost of underwriting to arrive at the rates charged to borrowers. See underwriter.

Built-ins - Cabinets, ranges, ceiling fans and other items permanently attached to a structure, and which a buyer may assume will remain with the structure.

Buydown - The process of trading money for a lower mortgage rate. The borrower "buys down" the interest rate on a mortgage by paying discount points up front. It can also be a mortgage in which an initial lump-sum payment is made to temporarily reduce a borrower's monthly payments during the first few years of a mortgage.