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An adjustable rate mortgage is a long-term loan you use to finance a real estate purchase, typically a home.
Unlike a fixed-rate mortgage, where the interest rate remains the same for the term of the loan, the interest rate on an ARM is adjusted, or changed, during its term.
The initial rate on an ARM is usually lower than the rate on a fixed-rate mortgage for the same term, which means it may be easier to qualify for an ARM. You take the risk, however, that interest rates may rise, increasing the cost of your mortgage. Of course, it's also possible that the rates may drop, decreasing your payments.
The rate adjustments, which are based on changes in one of the publicly reported indexes that reflect market rates, occur at preset times, usually once a year but sometimes less often. Typically, rate changes on ARMs are capped both annually and over the term of the loan, which helps protect you in the case of a rapid or sustained increase in market rates.
However, certain ARMs allow negative amortization, which means additional interest could accumulate on the outstanding balance if market rates rose higher than the cap. That interest would be due when the loan matured or if you want to prepay.
A mortgage that does not have a fixed interest rate. The rate changes during the life of the loan based on movements in an index rate, such as the rate for Treasury securities or the Cost of Funds Index. ARMs usually offer a lower initial interest rate than fixed-rate loans. The interest rate fluctuates over the life of the loan based on market conditions, but the loan agreement generally sets maximum and minimum rates. When interest rates increase, generally your loan payments increase; when interest rates decrease, your monthly payments may decrease.
- Browse Related Terms: Adjustable-Rate Mortgage (ARM), balloon mortgage, Ceiling, Co-maker, Fixed Rate Loan, fixed-rate mortgage, Home Equity Loan, Hybrid mortgage, Interest-only mortgage, Loan note, Negative amortization, Payoff, Payoff statement, Prepayment penalty, Principal balance, Refinancing, Rule of 78, Usury
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a mortgage loan with an interest rate that is subject to change and is not fixed at the same level for the life of the loan. These types of loans usually start off with a lower interest rate but can subject the homeowner to payment uncertainty when the rate adjusts.
Departments of the Treasury & Housing and Urban Development, Making Home Affordable Program - Cite This Source - This DefinitionA mortgage that does not have a fixed interest rate. The rate changes during the life of the loan based on movements in an index rate, such as the rate for Treasury securities or the Cost of Funds Index. ARMs usually offer a lower initial interest rate than fixed-rate loans. The interest rate fluctuates over the life of the loan based on market conditions, but the loan agreement generally sets maximum and minimum rates. When interest rates increase, generally your loan payments increase; and when interest rates decrease, your monthly payments may decrease.
- Browse Related Terms: Adjustable-Rate Mortgage (ARM), amortization, balloon mortgage, Convertible ARM, Debarment, Fixed-Rate Mortgage (FRM), Interest-only mortgage, Lock-In, Lock-in agreement, Mortgage life insurance, Negative amortization, Payment Cap, Right of rescission, Self-Amortizing Loans, Swap, term, Weighted Average Life (WAL)
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A mortgage that does not have a fixed interest rate. The rate changes during the life of the loan based on movements in an index rate, such as the rate for Treasury securities or the Cost of Funds Index. ARMs usually offer a lower initial interest rate than fixed-rate loans. The interest rate fluctuates over the life of the loan based on market conditions, but the loan agreement generally sets maximum and minimum rates. When interest rates increase, generally your loan payments increase; and when interest rates decrease, your monthly payments may decrease. For more information on ARMs, see the Consumer Handbook on Adjustable-Rate Mortgages.
A mortgage loan that allows the interest rate to be changed, usually based on an established index, at specific intervals over the maturity of the loan.
A mortgage loan that does not have a fixed interest rate. During the life of the loan the interest rate will change based on the index rate. Also referred to as adjustable mortgage loans (AMLs) or variable-rate mortgages (VRMs).
A variable or flexible rate mortgage with an interest rate that varies according to the financial index it is based upon. To limit the borrower's risk, the ARM may have a payment or rate cap. See also: cap.
- Browse Related Terms: Adjustable-Rate Mortgage (ARM), annual cap, ARM, CAP, interest cap, Life Cap, life-of-loan cap, Lifetime Cap, Payment Cap, Rate Cap
Also known as variable-rate mortgages. The initial interest rate is usually below that of conventional fixed-rate loans. The interest rate may change over the life of the loan as market conditions change. There is typically a maximum (or ceiling) and a minimum (or floor) defined in the loan agreement. If interest rates rise, so does the loan payment. If interest rates fall, the loan payment may as well.
Office of the Comptroller of the Currency, U.S. Department of the Treasury - Cite This Source - This Definition- Browse Related Terms: Adjustable-rate mortgages (ARMS), Adjustable-Rate Mortgages (ARMS,ARM), Billing Date, Conventional fixed-rate mortgage, Fixed Rate Loan, fixed-rate mortgage, Periodic statement, PITI, Principal, Interest, Taxes and Insurance (PITI), Refinancing
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Your AGI is your gross, or total, income from taxable sources minus certain deductions.
Income includes salary and other employment income, interest and dividends, and long- and short-term capital gains and losses. Deductions include unreimbursed business and medical expenses, contributions to a deductible individual retirement account (IRA), and alimony you pay.
You figure your AGI on page one of your federal tax return, and it serves as the basis for calculating the income tax you owe. Your modified AGI is used to establish your eligibility for certain tax or financial benefits, such as deducting your IRA contribution or qualifying for certain tax credits.
- Browse Related Terms: adjusted gross income (AGI), Alternative minimum tax (AMT), Deduction, Earned Income Credit (EIC), Exemption, Head of household, Modified adjusted gross income (MAGI), Real property tax, Tax credit
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Gross income reduced by certain amounts, such as a deductible IRA contribution or student loan interest
- Browse Related Terms: adjusted gross income (AGI), Citizen or Resident Test, dependency exemption, dependent, exemptions, filing status, foster child, Head of Household filing status, Married Filing Joint filing status, Married Filing Separate filing status, personal exemption, qualifying child, qualifying relative, Qualifying Widow(er) filing status, single filing status, standard deduction, tax deduction, tax-exempt interest income
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A person who investigates and settles losses for an insurance carrier.
The person who manages the various aspects of the claim and determines what will be paid out in accordance with the policy and the facts.
A person who investigates and settles insurance claims.
- Browse Related Terms: Adjuster, Agency, claim, Claimant, Claims Adjuster, Covered Expenses, Deductible, Insured, Insurer, Limits, Loss, Occurrence, Settlement
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A person who investigates and settles losses for an insurance carrier.
An individual employed by an insurer to evaluate losses and settle policyholder claims. Also see “public insurance adjuster.”
Texas Department of Insurance and Office of Public Insurance Counsel - Cite This Source - This Definition- Browse Related Terms: Adjuster, Agency, Claims Adjuster, Independent adjuster, Insurer, Public Adjuster, Public insurance adjuster, Staff adjuster
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The actual date that the interest rate is changed for an ARM.
- Browse Related Terms: Adjustable mortgage loan, Adjustment Date, Adjustment Index, Adjustment Interval, consumer handbook on adjustable rate mortgages (C.H.A.R.M.), Conversion Clause, Conversion Option, Convertible ARM, convertible mortgage, Cost of Funds Index (COFI), Fixed-Period Adjustable-Rate Mortgage, index, Inflation Coverage, Initial Interest Rate, Interest Rate Cap, Interest Rate Ceiling, Interest Rate Floor, LIBOR-Index, Margin, Mitigation, Payment Change Date, Prime rate, Treasury Index, Truth in lending, Two Step Mortgage, Variable maturity mortgage, variable rate mortgage (VRM)
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The published market index used to calculate the interest rate of an ARM at the time of origination or adjustment.
- Browse Related Terms: Adjustable mortgage loan, Adjustment Date, Adjustment Index, Adjustment Interval, consumer handbook on adjustable rate mortgages (C.H.A.R.M.), Conversion Clause, Conversion Option, Convertible ARM, convertible mortgage, Cost of Funds Index (COFI), Fixed-Period Adjustable-Rate Mortgage, index, Inflation Coverage, Initial Interest Rate, Interest Rate Cap, Interest Rate Ceiling, Interest Rate Floor, LIBOR-Index, Margin, Mitigation, Payment Change Date, Prime rate, Treasury Index, Truth in lending, Two Step Mortgage, Variable maturity mortgage, variable rate mortgage (VRM)
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The time between the interest rate change and the monthly payment for an ARM. The interval is usually every one, three or five years depending on the index.
- Browse Related Terms: Adjustable mortgage loan, Adjustment Date, Adjustment Index, Adjustment Interval, consumer handbook on adjustable rate mortgages (C.H.A.R.M.), Conversion Clause, Conversion Option, Convertible ARM, convertible mortgage, Cost of Funds Index (COFI), Fixed-Period Adjustable-Rate Mortgage, index, Inflation Coverage, Initial Interest Rate, Interest Rate Cap, Interest Rate Ceiling, Interest Rate Floor, LIBOR-Index, Margin, Mitigation, Payment Change Date, Prime rate, Treasury Index, Truth in lending, Two Step Mortgage, Variable maturity mortgage, variable rate mortgage (VRM)
Administrative Law Judge (ALJ) means an official appointed pursuant to 5 U.S.C. 3105.
- Browse Related Terms: Administrative Law Judge (ALJ), Attorney General, certification, Certifying Officer, Chief Administrative Law Judge (Chief ALJ), Employment and Training Administration (ETA), National Processing Center (NPC), Office of Foreign Labor Certification (OFLC), Office of Workforce Security (OWS), Secretary, State Employment Security Agency (SESA), State Workforce Agency (SWA)
Administrator means the Administrator of the Wage and Hour Division, Department of Labor, and such authorized representatives as may be designated to perform any of the functions of the Administrator under 20 C.F.R. 655, subpart H or subpart I.
- Browse Related Terms: Administrator, Debarment, Department and DOL, Division, Occupational Employment Statistics (OES), Reasonable cause, Wage and Hour Division (WHD), Willful violator, Working conditions
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The advance-decline line graphs the ratio of stocks that have risen in value - the advancers - to stocks that have fallen in value - the decliners - over a particular trading period.
The direction and steepness of the A-D line gives you a general idea of the direction of the market. For example, a noticeable upward trend, which is created when there are more advancers than decliners, indicates a growing market.
A downward slope indicates a market in retreat. At times, however, there may be no clear trend in either direction.
- Browse Related Terms: Advance-decline (A-D) line, Advancer, Decliner, Gainer, Loser, Rally, Sell-off
The first estimate of gross domestic product (GDP) and its components for a quarter. It is released 25-30 days after the end of the quarter and is based on source data that are incomplete and subject to revision. Related terms: Final estimate, Preliminary estimate.
- Browse Related Terms: Additive, additivity, Advance estimate, Advance estimates, Chain dollar, Current dollar, Directly estimated method, Double deflation, Final estimate, Final estimates, Monthly Treasury Statement, Preliminary estimate, Preliminary estimates
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A form of fraud in which consumers are asked to pay a fee up front and receive a quick loan of a large size with a very low APR. Consumers are lured to wire funds (oftentimes to Canada ) through newspaper and internet advertisements.
State of Maine, Department of Professional and Financial Regulation - Cite This Source - This Definition- Browse Related Terms: Advance Fee Loan Scam, Conforming Loan, construction loan, Credit Service Organization, Cure, Debit card, Default, Escrow Account, Jumbo, Loan/Mortgage Broker, processor, Third Party Fees
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Stocks that have gained, or increased, in value over a particular period are described as advancers.
If more stocks advance than decline - or lose value - over the course of a trading day, the financial press reports that advancers led decliners. When that occurs over a period of time, it's considered an indication that the stock market is healthy.
- Browse Related Terms: Advance-decline (A-D) line, Advancer, Decliner, Gainer, Loser, Rally, Sell-off
Under the Equal Credit Opportunity Act, a creditor's refusal to grant credit on the terms requested, termination of an existing account, or an unfavorable change in an existing account.
Office of the Comptroller of the Currency, U.S. Department of the Treasury - Cite This Source - This DefinitionUnder the Equal Credit Opportunity Act, a creditor's refusal to grant credit on the terms requested, termination of an existing account, or an unfavorable change in an existing account.
- Browse Related Terms: Account Agreement, Adverse Action, Adverse Action Notice, application, authorization, Available Credit, Billing Error, Credit card account agreement, Credit limit, Debit card, Individual Account, Missing payment, Money market deposit account, Overlimit, Personal Identification Number (PIN), Previous Balance, statement
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Under the Equal Credit Opportunity Act, a creditor's refusal to grant a loan on the terms requested, or termination of an existing line of credit loan.
- Browse Related Terms: Adverse Action, application, Credit score, Equal Credit Opportunity Act (ECOA), FICOî score, Home Affordable Modification Program (HAMP), Home Affordable Refinance Program (HARP)
The notice required by the Equal Credit Opportunity Act advising a credit applicant or existing debtor of the denial of their request for credit or advising of a change in terms considered unfavorable to the account holder.
The notice required by the Equal Credit Opportunity Act advising a credit applicant or existing debtor of the denial of their request for credit or advising of a change in terms considered unfavorable to the account holder.
Office of the Comptroller of the Currency, U.S. Department of the Treasury - Cite This Source - This Definition- Browse Related Terms: Account Agreement, Adverse Action, Adverse Action Notice, application, authorization, Available Credit, Billing Error, Credit card account agreement, Credit limit, Debit card, Individual Account, Missing payment, Money market deposit account, Overlimit, Personal Identification Number (PIN), Previous Balance, statement
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The notice required by the Equal Credit Opportunity Act advising a loan applicant or existing debtor of the denial of their request for credit or advising of a change in terms considered unfavorable to the borrower. Freezing the line of credit on a home equity loan requires the financial institution to send the adverse action notice to the borrower describing why the financial institution froze the line.
- Browse Related Terms: Adverse Action Notice, Annual Percentage Rate (APR), Credit application, Discount rate, Federal Open Market Committee (FOMC), Finance Charge, interest, Interest rate, Money factor, Origination fee, Periodic interest rate, Prequalification, Prime rate, Regulation Z, Right of rescission, Truth-in-Lending Act
A sworn statement in writing before a proper official, such as a notary public.
Office of the Comptroller of the Currency, U.S. Department of the Treasury - Cite This Source - This DefinitionA sworn statement in writing before a proper official, such as a notary public.
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A sworn statement in writing before a proper official, such as a notary public.
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A signed, sworn statement made by the buyer or seller regarding the truth of information provided.
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A card that offers rewards that benefit groups and organizations.
- Browse Related Terms: Affinity card, Credit counseling service, Opt-in, Opt-out, Premium credit card, Prime rate, Purchases
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Affinity fraud occurs when a dishonest person plays on your affiliation with a group - such as a house of worship, social club, support group, charity, or veterans' group - as a way to win your confidence in order to sell you something worthless or trick you into handing over cash.
The scammer may actually be a member of the group or may just pretend to be.
Affinity fraud is one the most difficult scams to protect yourself against because being suspicious of colleagues can undermine the reason you belong to a group.
- Browse Related Terms: Affinity fraud, Earnest Money, ex-dividend, Good faith deposit, Net change, Record date, Settlement date, Tick, Uptick
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Securities, such as stocks and bonds, may change hands on organized markets and exchanges after regular business hours, in what is known as the after-hours market.
These electronic transactions explain why a security may open for trading at a different price from the one it closed at the day before.
There's also trading in benchmark indexes such as Standard & Poor's 500-stock Index (S&P 500) and the Dow Jones Industrial Average (DJIA) before US stock markets open. The level of activity and the direction the trading - up or down - is widely interpreted as an early indicator of what's likely to happen in the market during the day.
- Browse Related Terms: After-hours market, American depositary share (ADS), Bellwether, Composite trading, DIAMONDs, Electronic Data Gathering, Analysis, and Retrieval System (EDGAR), Listed security, Listing requirement, Nikkei Stock Average, Options Clearing Corporation (OCC), OTC Bulletin Board (OTCBB), Regional exchange, Restricted security, Unlisted security