Glossary of Debt Related Terms

Abandonment

The voluntary relinquishment of rights of ownership or other interest (such as an easement) by failure to use the property, coupled with an intent to abandon (give up the interest).

Abatement

A reduction or decrease. Usually applies to a decrease of assessed valuation of ad valorem taxes after the assessment and levy.

Abstract

A summary, an abridgement. Before the use of photo static copying, public records were kept by abstracts of recorded documents.

Abstract (of Title)

A summary of the public records relating to the title to a particular piece of land. If there are any title defects they must be cleared before a buyer can purchase clear, marketable, and insurable title.

Abstract Of Judgment

A summary of the essential provisions of a court judgment, which when recorded in the county recorder's office, creates a lien upon the property of the defendant in that county, both presently owned or after acquired

Abstracter's Certificate

A certificate contained in an abstract which shows the time period and scope of the search of public records done by the abstracter.

Acceleration Clause

Allows the lender to speed up the rate at which your loan comes due or even to demand immediate payment of the entire balance of the loan should you default on you loan.

Accessibility

The location of a site in terms of how easily it may be reached by customers. employees, carriers, and others necessary to the intended use of the property.

Accord

An agreement by which one accepts something different (usually less) from what is owed as full satisfaction The amount owed may be in dispute or simply accepted as full satisfaction by the creditor or claimant. The agreement and acceptance is called "Accord and Satisfaction."

Accretion

The gradual addition to the shore or bank of a waterway. The land generally becomes the property of the owner of the shore or bank, except where statutes specify otherwise.

Accrued Depreciation

(1) The amount reserved each year in the accounting system for replacement of a building or other asset. (2) The useful life of a property at any given time.

Acknowledgement

A written declaration by a person executing an instrument, given before an officer authorized to give an oath (usually a notary public), stating that the execution is of his own volition.

Acquisition Costs

Costs of acquiring property other than purchase price: escrow fees, title insurance, lenders fees, etc.

Act Of God

Damage caused by nature (floods. winds. etc.) rather than destruction by man.

Ad Valorem

According to value. A method of taxation using the value of the thing taxed to determine the amount of tax. Taxes can be either "Ad Valorem" or "Specific." Example: A tax of $5.00 per $1000.00 of value per house is "Ad Valorom," A tax of S5.00 per house (irrespective of value) is "Specific."

Add on Interest

A method of charging interest usually used in the financing of automobiles, but not generally used in real estate financing. Interest is computed on the total amount borrowed and added on to the principal. Each payment is then deducted from this total amount. Interest on real estate loans is usually figured based on the balance owing after each payment is made (declining balance).

Adjustable Rate Mortgage (ARM)

A mortgage in which the interest rate is adjusted periodically based on an index. Also known as the renegotiable rate mortgage, the variable rate mortgage or the Canadian rollover mortgage.

Adjusted Gross Income

Gross income of a building it fully rented, less an allowance for estimated vacancies.

Adjustment Interval

On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, usually one, three or five years.

Advance Fee

A fee charged by a broker to a seller to cover all ora portion of the broker's costs of promoting the property. The fee is generally credited against commissions but is not refunded if no commissions are received. Most frequently used in connection with large offerings which require a substantial outlay of funds for promotion.

Agency

A relationship created when one person (the principal) delegates to another (the agent) the fight to act on his or her behalf in business transactions.

Agreement of Sale

Known by various names, such as contract of purchase, purchase agreement, or sales agreement according to location or jurisdiction. A contract in which a seller agrees to sell and a buyer agrees to buy, under specific terms spelled out in writing and signed by both parties.

All inclusive Trust Deed (wrap-around mortgage)

A financing technique which involves the creation of a new trust deed which includes the balance due on the existing note plus any new funds advanced.

American Land Title Association (ALTA)

A national association of title insurance companies, abstractors, and agents. The association adopts standard title policy forms.

Amortization

The gradual reduction of a debt by periodic payments of interest and principal that are large enough to pay off a loan at maturity. The loan is repaid through regular, monthly payments of principal and interest paid for a predetermined amount of time.

Annual Fee

A credit card issuer may charge you a fee each year for your account.

Annual Percentage Rate (APR)

The annual cost of a loan to a borrower. Like an interest rate, the APR is expressed as a percentage of the loan amount. Unlike an interest rate, however, it includes other charges or fees to reflect the total cost of the loan. The Federal Truth in Lending Act requires that every consumer loan agreement disclose the APR in large, bold print. Since all lenders must follow the same rules to ensure the accuracy of the APR, borrowers can use the APR as a good basis for comparing the cost of loans.

Appel Loan (Accelerating Payoff Progressive Equity Loan)

A residential property loan which calls for a payment increase over the first 6 years. Level payments are made for the remaining years and the loan paid off during the 15th year. There is no prepayment penalty and P.M.I. is required.

Appraisal

A written analysis of the estimated value of a property, as prepared by a qualified appraiser. A fee is typically charged for a real estate appraisal because a home appraisal is time-consuming. An appraisal of an auto is usually not necessary because auto dealers, sellers and buyers all have quick access to the market value of autos.

Appraisal Fee

The charge for estimating the value of property.

Appraisal Methods

Generally, three major methods of appraisal: Cost Approach, Income Approach, Market Value (comparables) Approach.

Arrears

(1) Payment made after it is due is in arrears. (2) Interest is said to be paid in arrears since it is paid to the date of payment rather than in advance, as is rent. Example: A rental payment made July 1 pays the rent to August 1. An interest payment made July 1 Pays the interest to July 1.

Asset

Anything that has monetary or exchange value that is owned by an individual, business or institution. Assets include real estate property, personal property, vehicles and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on). A lender is very interested in the amount and value of any assets you may have because assets can be used as collateral against a loan. Along with other factors such a a borrower's credit rating, assets are also used to help determine the amount of the loan.

Assumable

A mortgage loan which can be transferred to another person without a change in the terms of the loan. VA and FHA loans are assumable, FHLMC and FNMA are not.

Assumption

The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt.

Assumption of Note

Agreement by a buyer to assume the liability under an existing note secured by a mortgage or deed of trust. The lender usually must approve the new debtor in order to release the existing debtor (usually the seller) from liability.

Automated Teller Machines (ATMs)

Electronic terminals through which customers may make deposits, withdrawals, or other transactions as they would through a bank teller.

Avigation Easement

An easement over private property abut-ting an airport runway, which limits the height of crops, trees, structures. etc., in the aircraft's take off and landing path.