Homebuying terms that start with A

Starting off the new year with some fun vocabulary terms is a great way to learn more about the home buying process. By reading this, you will gain a better understanding of the following: amortization, adjustable rate mortgage, annual percentage rate, assessment, and arbitration.

Amortization is the process of paying off debt with regular payments made over time. The fixed payments cover both the principal and the interest on the account, with the interest charges becoming smaller and smaller over the payment schedule.

An adjustable-rate mortgage, or ARM, is a mortgage with an interest rate that can be increased or decreased from time to time, depending on various factors. An ARM is helpful for someone taking out a mortgage during a period of low interest rates, especially if the ARM has a relatively longer fixed-rate period.

Annual percentage rate, or APR, is a way of measuring the full cost a lender charges per year for funds. Typically associated with mortgages, loans and credit cards, APR combines the total amount of interest payable and the cost of other fees and charges, averaged over the term of the loan and expressed as a percentage.

An assessment establishes the value of an asset, such as a home or a vehicle, for taxation purposes. In some cases, an assessment is calculated to determine risk or the quality of a company’s asset management.

Arbitration is a process for resolving legal disputes without going to trial. Both consumers of a company’s products or services as well as employees of that company may be compelled into mandatory arbitration proceedings when they file a complaint against the company. As arbitration becomes increasingly widespread, it has also become more controversial because it tends to favor the company at the expense of the claimant.

Look for homebuying terms starting with the letter B next month!

blog comments powered by Disqus