Chapter 10 Vocab

Question 1

Adjustable rate mortgage

Answer 1

a mortgage loan with the interest rate on the note periodically adjusted based on an index

Question 2

Appraisal fee

Answer 2

a payment made to someone to evaluate how much a home is worth

Question 3

Balloon Loan

Answer 3

a type of loan that doesn’t fully amortize over its term

Question 4

Closing costs

Answer 4

fees for lawyers, credit checks, title searches, surveys, taxes, and the preparation of the documents

Question 5

Conventional mortgage

Answer 5

a loan not guaranteed or insured by any government agency

Question 6

Default

Answer 6

failure to repay a loan

Question 7

Down payment

Answer 7

an initial payment made when something is bought on credit

Question 8

Fixed mortgage rate

Answer 8

loan where the interest rate on the note remains the same through the term of the loan

Question 9

Graduated payment mortgage

Answer 9

mortgage with low initial monthly payments which gradually increase over a specified time frame

Question 10

Growing equity mortgage

Answer 10

a fixed rate mortgage on which the monthly payments increase over time according to a set schedule

Question 11

Home equity loan

Answer 11

loan where the borrower uses the equity of his/her home as collateral

Question 12

Interest only mortgage

Answer 12

amount of money paid for the use of the lender’s money

Question 13

Lease

Answer 13

an agreement for the use of property such as a building or a vehicle, usually on an annual basis

Question 14

Liability coverage

Answer 14

financial protection against accidents that cause bodily injury and property damage

Question 15

Line of credit

Answer 15

amount of credit extended to a borrower

Question 16

Mortgage

Answer 16

gives the lender the right to seize and sell the property if you fail to make payments

Question 17

Personal loan

Answer 17

loans that are advanced on the basis of the borrower’s credit history and ability to repay the loan

Question 18

Refinance

Answer 18

finance a loan again

Question 19

Reverse mortgage

Answer 19

a financial agreement where a homeowner relinquishes equity in their home in exchange for regular payements

Question 20

Second mortgage

Answer 20

a mortgage taken out on a property that is already mortgaged

Question 21

Shared appreciation mortgage

Answer 21

the lender agrees as part of the loan to accept some or all payment in the form of a share of the increase in value

Question 22

Subprime mortgage

Answer 22

loan granted to individuals with poor credit histories (<600)

Question 23

Teaser rate

Answer 23

a low, adjustable introductory interest rate advertised for a loan/credit card to attract potential customers to obtain the service

Question 24

Title insurance

Answer 24

covers loss of ownership interest in a property due to legal defects