Account Summary

A list of all activities and changes to a specified banking account. For example, an account summary of a savings account may contain details of deposits, withdrawals, transfers and earned interest. Account summaries may be provided to account holders monthly, quarterly or annually, or upon request.

Adjustable-rate mortgage (ARM)

A mortgage featuring a changing, or adjusting, interest rate. If you choose an ARM, your mortgage's interest rate will change, or adjust, periodically in accordance with the loan agreement. For example, a loan agreement for a 3/1 ARM may state that the rate on a 1-year ARM will be reset annually after an initial period of 3 years. When your loan's interest rate adjusts, your monthly payments will increase or decrease.

AARP

Formerly the American Association of Retired Persons, the AARP is a nonprofit, nonpartisan membership-based organization dedicated to providing programs and information to senior adults. More information may be found at www.aarp.org.

Amortization

Amortization is the gradual reduction of loan principal that occurs as a loan is repaid, with an increasing amount of each payment applied to principal and a lesser amount applied to interest. Your Mortgage Consultant can provide an Amortization Schedule that illustrates this reduction of principal during your loan's term.

Annual fee

A yearly cost charged to the customer in connection with maintaining or servicing certain types of financial products.

Annual percentage rate (APR)

This is the real cost that you pay to borrow money, and is stated as a yearly percentage of the loan amount. This is sometimes called your effective borrowing cost. For mortgage loans, closing costs and discount points are added to calculate APR.

A percentage rate reflecting the total amount of interest paid on any account, based on the amount compounded for a one-year period.

Annuities

Financial contracts you make with an insurance company. An annuity may be deferred or immediate. With a deferred annuity, you put money in and over time it accrues income and earnings. The payout occurs at a later date, when you may receive a steady stream of payments to supplement your income. An immediate annuity is purchased with one payment and features a specified payment plan which starts immediately.

Appraisal

The process of estimating the fair market value of an asset. These are routinely required when processing home loan applications and other real estate transactions. An appraiser should be a certified professional selected in accordance with the rules of the Home Valuation Code of Conduct (HVCC). Real estate appraisers generally use the comparable-sales method, using the sales price per square foot of several recently sold, similar properties to determine a property's fair market value. An appraiser may also use the replacement method, which is the cost to replace the home at today's prices, to determine a property's value.

Appreciation

Appreciation is the increase in the value of an asset, measured in dollars or as a percentage. For example, an investment that rises in price to $25 from $20 has appreciated $5 or 25%.

Appreciation rate

Appreciation rate is the yearly percentage rate at which an asset increases in value. For example, a home that sold for $150,000 three years ago that is now worth almost $200,000 had an average appreciation rate of 10%.

Assessed value

The city, township or county that you live in may charge you real estate taxes. If so, it probably sets a tax rate for each square foot of land in the lot you own. This is the assessed tax rate. To calculate the assessed value, multiply the assessed rate times the size of your lot. For example, if Township Taxing Authority charges a real estate tax of $.05 per square foot, and your lot size is 20,000 square feet, the assessed value of your lot is $1,000.

Assumption

An agreement between a buyer and seller whereby the buyer assumes, or takes over, the seller's payments on an existing mortgage. Generally, assumptions are only available for government-insured mortgages.

Automatic payment

A pre-authorized payment deducted automatically from an account to pay recurring bills. Payments are usually scheduled for the same calendar day of the month.

Automatic transfer

A pre-authorized transfer that moves funds from one account to another within an institution automatically. Automatic transfers are generally scheduled to be carried out on the same day of the month; for example, the 1st and the 15th of every month.

Automated clearing house (ACH)

The networks used as a means to transfer money electronically between accounts at different institutions, usually in one day.