Glossary of Terms Used in the Mortgage Industry

• Acceleration clause. A contractual provision in the loan document entitling the lender to demand payment of the entire outstanding loan balance in the event that the borrower violates certain terms of the loan agreement (for example, default on required loan payments).
• Adjustable rate mortgage (ARM). This is a loan whose interest rate is not fixed. The interest varies based upon a set benchmark such as the prime interest rate. It is common for mortgage products to be fixed for a certain period of time (i.e., the first 18 months) and then convert to variable after that time.
• Amortization schedule. A table breaking down the monthly loan payments between interest and principal. See sample loan amortization schedule.
• Annual percentage rate (APR). APR is the annual percentage rate that takes into account not just the stated monthly interest paid under the loan agreement but, also, loan origination fees (points) and the other costs associated with securing a loan (such as appraisal, document processing, and credit report fees). The calculation of this rate is dictated by the federal Truth In Lending Act.