This combination Real Estate Glossary and Personal Finance Glossary provides definitions of commonly used real estate and personal finance terms. All definitions are listed below, arranged in alphabetical order.
Abstract of Title -
An Abstract of Title is a summary of the public records affecting the title to a particular piece of land. An attorney or title insurance company officer creates the abstract of title by examining all recorded instruments (documents) relating to a specific piece of property, such as easements, liens, mortgages, etc.
Accelerated Benefit -
An Accelerated Benefit is a rider that allows a terminally ill person to cash in a policy before he or she dies and collect up to 95 percent of the policy's face value.
Acceleration Clause -
An Acceleration Clause is a provision in a loan agreement that allows the lender to require the balance of the loan to become due immediately if mortgage payments are not made or there is a breach in your obligation under your mortgage or note.
Accumulation Fund -
An Accumulation Fund is the savings component of a universal life insurance policy. The money in this fund earns interest and goes to pay the higher cost of the mortality charge as you age. As long as you pay enough to fund the mortality charge, you can skip payments if your funds dry up. And, if you contribute enough to the accumulation fund early on and you get a few good years of interest, that interest may be enough to pay the premium later on.
Acquisition or Bank Fee -
The Acquisition or Bank Fee is the average fee you'll pay to a car dealer at the start of a car lease. Typically it is $300 to $400, and is not negotiable.
An Addendum is any addition to, or modification of, a contract. Also called an amendment or rider.
Adjustable-Rate Mortgage (ARM) -
An Adjustable-Rate Mortgage (ARM) is a type of loan whose prevailing interest rate is tied to an economic index (like one-year Treasury Bills), which fluctuates with the market. The three most popular types of ARMs are one-year ARMs, which adjust every year, three-year ARMs, which adjust every three years, and five-year ARMs, which adjust every five years. When the loan adjusts, the lender tacks a margin onto the economic index rate to come up with your loan's new rate. ARMs are considered riskier than fixed-rate mortgages, but their starting interest rates are generally lower than a longer-term rate, and in the past five to ten years, people have done very well with them.
Adjusted Gross Income -
Adjusted Gross Income is your total income reduced by contributions to retirement accounts, alimony payments, and certain other exclusions.
Agency is a term used to describe the relationship between a home seller and a real estate broker, or a home buyer and a real estate broker.
Agency Closing -
Agency Closing refers to the lender's use of a title company or other party to act on the lender's behalf for the purposes of closing on the purchase of a home or refinancing of a home loan.
An Agent is an individual who acts on behalf of a consumer. A real estate agent represents a buyer or a seller in the purchase or sale of a home. Licensed by the state, a real estate agent must work for a broker or a brokerage firm. An insurance agent helps a consumer purchase an insurance policy. Insurance agents are also licensed by the state.
Agreement of Sale -
An Agreement of Sale is the agreement by which the seller agrees to sell you his or her property if you pay a certain price. It contains all the provisions and conditions for the purchase, must be written, and is signed by both parties. Also known as the contract of purchase, purchase agreement, or sales agreement.
Amortization is a payment plan which enables the borrower to repay his debt gradually through monthly payments of principal and interest. Amortization tables allow you to see exactly how much you would pay each month in interest and how much you repay in principal, depending on the amount of money borrowed at a specific interest rate.
Annual Mileage Allowance -
Your Annual Mileage Allowance is the number of miles included as part of a car lease. Car dealers will offer as few miles as they can get away with, perhaps as few as 10,000 per year, or 30,000 over a 3-year lease. But they will go as high as 15,000 miles per year if you negotiate it. You'll pay anywhere from 10 cents to 50 cents for each additional mile you drive over the limit, so negotiate mileage (and think carefully about how far you drive before you negotiate).
Annual Percentage Rate (APR) -
The Annual Percentage Rate (APR) is the total cost of a loan, expressed as a percentage rate of interest, which includes not only the loan's interest rate, but factors in all the costs associated with making that loan, including closing costs and fees. The costs are then amortized over the life of the loan. Banks are required by the federal Truth-in-Lending statutes to disclose the APR of a loan, which allows borrowers a common ground for comparing various loans from different lenders.
Any-Occupation Policy -
Any-Occupation Policy refers to a type of private disability insurance that pays if -- from the insurer's perspective -- you can't work at any job for which your education and training qualify you.
Your Application is a series of documents you must fill out when you apply for a home loan, or insurance policies.
Application Fee -
An Application Fee is a one-time fee charged by a company for processing your application for a loan. For a home loan, the application fee is sometimes applied toward certain costs, including the appraisal and credit report.
An Appraisal is the opinion of an appraiser, who estimates the value of a home at a specific point in time for the purpose of financing or refinancing a home.
Articles-of-Agreement for Deed -
Articles-of-Agreement for Deed refers to a type of seller financing which allows the buyer to purchase the home in installments over a specified period of time. The seller keeps legal title to the home until the loan is paid off. The buyer receives an interest in the property -- called equitable title -- but does not own it. However, because the buyer is paying the real estate taxes and paying interest to the seller, it is the buyer who receives the tax benefits of home ownership.
Asset Allocation -
Asset Allocation is a term used to express your choice among different types of asset classes and styles. You might have growth or value funds, which are mutual funds typically focused on companies that are growing quickly or companies that are perhaps out of favor temporarily, and are typically priced cheaply relative to their assets, profits and potential. Value funds are betting that these stocks have a lot of room to grow. Your fund may be international (holding shares of international companies) or domestic (holding shares of U.S. companies only). It might be large cap (focused on huge corporations), mid-cap (medium-sized companies), or small-cap (smaller companies).
Assumption of Mortgage -
An Assumption of Mortgage occurs when you you purchase a home and assume a pre-existing mortgage. You undertake to fulfill the obligations of the existing loan agreement the seller made with the lender. The obligations are similar to those that you would incur if you took out a new mortgage. When assuming a mortgage, you become personally liable for the payment of principal and interest. The seller, or original mortgagor, is released from the liability, and should get that release in writing. Otherwise, he or she could be liable if you don't make the monthly payments.
Balloon Mortgage -
A Balloon Mortgage is a type of mortgage which is generally short in length, but is amortized over twenty-five or thirty years so that the borrower pays a combination of interest and principal each month. At the end of the loan term, the entire balance of the loan must be repaid at once.
Blue Chips -
Blue chips are large, well-established companies that offers investors some growth with a solid dividend. Companies listed on the S&P 500 are frequently referred to as blue chip stocks, capable of weathering even the worst market fluctuations.
A Bond is a government's (federal or municipal) or a corporation's obligation to repay you your principal plus a certain amount of interest over a fixed period of time.
Bond Fund -
A Bond Fund is a short hand way of talking about a mutual fund made up of bond issues.
Building Code and Condition Coverage -
Building Code and Condition Coverage is a homeowner's insurance rider that covers the cost of meeting new building codes that may have gone into effect after your home was built and to which any new homes built are subject. Also known as an Ordinance-and-Law Rider.
Building Line or Setback -
The Building Line or Setback refers to the distance from the front, back, or side of a lot beyond which construction or improvements may not extend without permission by the proper governmental authority or other party. The building line may be established by a filed plat of subdivision, by restrictive covenants in deeds, by building codes, or by zoning ordinances.
Buy Down -
A Buy Down is an incentive offered by a developer or home seller that allows the homebuyer to lower his or her initial interest rate by putting up a certain amount of money. A buy down also refers to the process of paying extra points up front at the closing of your loan in order to have a lower interest rate over the life of the loan.
Buyer Broker -
A Buyer Broker is a real estate broker who specializes in representing buyers. Unlike a seller broker or conventional broker, the buyer broker has a fiduciary duty to the buyer, because the buyer accepts the legal obligation of paying the broker. The buyer broker is obligated to find the best property for a client, and then negotiate the best possible purchase price and terms. Buyer brokerage has gained a significant amount of respect in recent years, since the National Association of Realtors has changed its code of ethics to accept this designation.
Buyer's Market -
A Buyer's Market exists when conditions favor the buyer. A buyer's market is usually expressed when there are too many homes for sale, and a home can be bought for less money.
Callability exists if a bond may be called in before it is due. This means the issuer of the bond may decide to refinance its debt and pay back all of the bond holders early. If interest rates fall, the chances of a bond being called increase because the bond holder could simply refinance the debt for less money (like you'd refinance your mortgage if rates dropped).
Calls occur when a company orders preferred stock or bond holders to turn in their stock or bonds for money.
Capital Gain -
A Capital Gain is the profit made on the sale of stocks, bonds, real estate, or other assets.
Capital Loss -
A Capital Loss is the loss taken on the sale of stocks, bonds, real estate, or other assets.
Capitalized Cost Reduction -
The Capitalized Cost Reduction is your down payment for the purchase of a car. It is negotiable. If you're trading in a car, the value of the trade in should be applied to either the capitalized cost reduction or your monthly payments.
Cash Surrender Value -
The Cash Surrender Value is the amount available in cash upon voluntary termination of an insurance policy by its owner before it becomes payable by death or maturity. This amount is typically paid in cash or paid-up insurance.
Cash Value Policy -
A Cash Value Policy is a category of life insurance including whole life, universal life and variable universal life that combines the death benefit with a savings component. The insurance policy is broken down into two parts: the mortality charge (the part that pays for the death benefit) and a reserve (the savings component that earns interest). As you get older, the cost of the death benefit rises. In addition to interest, the reserve might receive an annual dividend, depending on how many policies have been paid out and how well the insurer has invested the premiums it has received.
Catastrophic Care -
Most health insurance policies cover Catastrophic Care, including such procedures as transplants, complex neo-natal care, severe burns care, or trauma care.
Certificate of Title -
A Certificate of Title is the document or instrument issued by a local government agency to an owner, naming the owner as the owner of an automobile or boat. When the item is sold, the certificate of title is transferred to the buyer. The agency then issues a new certificate of title to the buyer.
Chain of Title -
The term Chain of Title refers to the lineage of ownership of a particular property.
Churning, also known as twisting, is an attempt by an unscrupulous agent from an insurance company to cancel your existing policy and replace it with a new one, drawing down your cash value (called "juice" in industry jargon) to pay for it. This activity generates additional commission for the agent and may result in your having to pay more down the line. It is also a word used to describe the actions of a stock broker who continually buys and sells for an account, churning profits for the broker oftentimes eating up whatever profits might be there for the consumer.
Classified Shares -
Classified Shares are mutual fund shares that are grouped alphabetically. "A" shares are traditional load fund where you pay the broker right off the top of your investment. "B" shares still pay a commission, but the mutual fund puts up the money and then gradually withdraws it from your account. "C" and "D" shares are sometimes called level-load funds. The broker gets no commission up front, but instead gets an annual fee (called a trail commission) from the investor's account.
A Closed-Ended fund is a mutual fund that has closed its doors to new investors and their cash in order to maintain its size and position in the market.
Common Stock -
Common Stock is a share of ownership in a company.
Conditionally Renewable Policy -
A Conditionally Renewable Policy is a type of private disability insurance policy that may be renewed at the insurer's discretion.
Consumer Federation of America (CFA) -
The Consumer Federation of America (CFA) is a non-profit association of consumer interest groups that works to further the consumer interest through educational programs and advocacy. The CFA pays particular attention to those in need, including children, elderly persons living on fixed incomes, and the poor.
Consumer Price Index (CPI) -
The Consumer Price Index (CPI) measures changes in the prices of all the goods and services that urban households purchase for consumption. The CPI is used as an economic indicator, a policy guide, a means to adjust income payments for inflation, and a means to determine the cost of school lunches, to mention a few of its uses.
Contrarian fund -
A Contrarian Fund is a stock mutual fund that is positioned against conventional wisdom. So when Asia was headed into a recession during the late 1990s, contrarian international funds went in and began swooping up the stocks of companies, betting that they'd come back.
Convertible Bond -
A Convertible Bond is a bond that can be converted into shares of stock in a corporation.
Corporate Bond -
A Corporate Bond is a bond issued by a corporation.
Cost-Of-Living Adjustments (COLA) -
A Cost-Of-Living Adjustments (COLA) rider can be added to a long-term care policy to ensure that the policy owner's benefits increase to keep pace with the consumer price index (CPI).
The Coupon refers to the actual interest payment made on each bond. If you have a $5,000 bond paying 7 percent interest, you will receive $350 each year, most likely in two $175 payments. The $350 is the coupon. The interest rate of the bond is also referred to as the coupon rate. The name originates from how you used to collect your interest (and still do on some). You'd actually clip a coupon and bring it in to receive your interest. Today, this is often done electronically, with the interest simply deposited in your bank account.
Current Yield -
The Current Yield is the coupon interest payment divided by the bond's price. This will fluctuate based on where interest rates are and what you could currently sell your bond for in the marketplace.
Debt Service -
Debt Service is the total amount of debt (credit cards, mortgage, car loan) that an individual is carrying at any one time.
Deferred Compensation Plan -
A Deferred Compensation Plan is an employee benefit plans that lets employees contribute a percentage of pre-tax earnings into tax deferred savings plans, like a 401K or Keogh, rather than receive the amounts as current compensation. The earnings are excluded from tax calculations, and grow tax-free until the funds are withdrawn at retirement.
Department of Housing and Urban Development (HUD) -
Also known as HUD, the Department of Housing and Urban Development is the federal department responsible for the nation's housing programs. It also regulates RESPA, the Real Estate Settlement Procedures Act, which governs how lenders must deal with their customers.
A Dependent is an individual for whom the taxpayer provides over half of the support for the calendar year. This could be a child, spouse, relative or non-relative living as a member of the taxpayer's household.
Newly-issued bonds are typically sold at some sort of Discount. So a bond that has a face value of $1,000 and sells for $925 has a $75 discount. When interest rates rise, bonds are discounted more because you need a less expensive bond to achieve the same interest rate.
Diversified Funds -
According to the Diversified Mutual Fund Investment Act of 1940, mutual funds identified as Diversified Funds must spread their assets around. Seventy-five percent of their assets must be divvied up so no more than 5 percent of the fund's assets are invested in a single stock. Funds that do not call themselves diversified may invest a larger percent of their holdings in a single stock.
A shareholder's share of a company's profits, typically paid out in quarterly installments. To find out how much you'll receive, multiply the dividend (published in your local paper) by the number of shares you own.
An Endorsement is an amendment to an insurance policy, usually by means of a rider.
Your share of ownership in a company. Stockholders are often referred to as equity investors, because they invest in the equity of a company.
Estimated Tax Payments -
If you are self-employed, or have significant income dividend or investment income in addition to your regular salary, you must make Estimated Tax Payments based on the estimated tax you'll owe at the end of the year. Your estimated tax payments must equal either 100 percent of the tax you paid in the previous year or 90 percent of your total tax for the current year.
Fee Simple -
Fee Simple is the most basic type of ownership, under which the owner has the right to use and dispose of the property at will.
Fiduciary Duty -
Fiduciary Duty is a relationship of trust between a broker and a seller or a buyer broker and a buyer, or an attorney and a client.
Filing Status -
Your Filing Status is a declaration as to your personal status (i.e. married, single, separated, dependents or not). Your filing status will determine your standard deduction, the tax rate table you'll use to compute your tax liability, and the deductions and credits to which you're entitled.
First Mortgage -
A First Mortgage is a mortgage that takes priority over all other voluntary liens.
The term Fixture refers to personal property, such as a built-in bookcase, furnace, hot water heater, and recessed lights, that becomes "affixed" because it has been permanently attached to the home.
Foreclosure is the legal action taken to extinguish a home owner's right and interest in a property, so that the property can be sold in a foreclosure sale to satisfy a debt.
Fund Of Funds -
A Fund of Funds is a mutual fund that is made up of other mutual funds. The idea here is that you are not diversified enough by choosing a diversified mutual fund, so you buy one fund that diversifies by purchasing several different funds.
Fund Supermarket -
A Fund Supermarket is a relatively new concept, a fund supermarket is an investment firm (often called a family) which offers not only its own mutual funds, but the ability to invest in the mutual funds of other families. The nice thing about this is that all of your investments in these funds would be displayed on one statement from your primary family. On the down side, sometimes supermarkets will tack on additional charges for investing in funds outside the family if that fund doesn't separately pay a commission.
GAP Insurance -
GAP Insurance stands for guaranteed auto protection and you need it if you're leasing. This insurance will pay the balance on the lease and the early termination penalties if the car is stolen or totaled. Negotiate to have it included with your lease payment.
Gift Letter -
A Gift Letter is a letter to the lender indicating that a gift of cash has been made to the buyer and that it is not expected to be repaid. The letter must detail the amount of the gift, and the name of the giver.
Good Faith Estimate (GFE) -
Under RESPA, lenders are required to give potential borrowers a written Good Faith Estimate (GFE) of closing costs within three days of an application submission.
Grace Period -
The Grace Period is the period of time after a loan payment due date in which a mortgage payment may be made and not be considered delinquent.
Graduated Payment Mortgage -
A Graduated Payment Mortgage is a mortgage in which the payments increase over the life of the mortgage, allowing the borrower to make very low payments at the beginning of the loan.
Gross Capitalized Cost -
The Gross Capitalized Cost is the price of the car that the dealer uses to construct the lease. It also includes all the items and services that come with the car in the lease. A crucial number, it is negotiable.
Growth Stock -
A Growth Stock is a company that is focusing on growing above all else. All profits are typically reinvested into the company to keep it growing quickly, so little if any dividends are paid.
Guaranteed Cost Replacement -
Guaranteed Cost Replacement is a type of homeowner's insurance that guarantees to rebuild your home no matter what the cost and has a rider built in to take care of inflation. On some policies, insurers might only pay to rebuild your home up to 120 to 125 percent of your policy amount. It's up to you to stay on top of how much it will cost to rebuild your home.
Guaranteed Renewable Policy -
A Guaranteed Renewable Policy is a insurance policy that must be renewed as long as the insured pays the premium on time. Typically, an insurer cannot make any changes to a guaranteed renewable policy other than to increase the premium rate for an entire class of policy holders.
Hard Asset Funds -
A Hard Assets Fund is a mutual fund that holds a portion of its assets in gold or silver, or other commodities like these, or in indices that are based on hard assets. Hard asset funds may also be invested in real estate.
Hazard Insurance -
Hazard Insurance is insurance that covers the property from damages that might materially affect its value. Also known as homeowner's insurance.
Health Insurance Portability and Accountability Act -
Effective July 1, 1997 the Health Insurance Portability and Accountability Act specifies that if a person has been covered by insurance during the past 12 months, a new insurer cannot refuse to cover that person nor can it force him or her to accept a waiting period when joining a new group plan.
HMO (Health Maintenance Organization) -
An HMO (Health Maintenance Organization) is an organization that provides a wide range of comprehensive health care services for a specified group at a fixed periodic payment. An HMO can be sponsored by the government, medical schools, hospitals, employers, labor unions, consumer groups, insurance companies, and hospital-medical plans.
A Holdback is an amount of money held back at closing by the lender or the escrow agent until a particular condition has been met. If the problem is a repair, the money is kept until the repair is made. If the repair is not made, the lender or escrow agent uses the money to make the repair. Buyers and sellers may also have holdbacks between them, to ensure that specific conditions of the sale are met.
Home Inspection -
A Home Inspection is the service a professional home inspector performs when he or she is hired to scrutinize the home for any possible structural defects. May also be done in order to check for the presence of toxic substances, such as leaded paint or water, asbestos, radon, or pests, including termites.
Home Warranty -
A Home Warranty is a service contract that covers appliances (with exclusions) in working condition in the home for a certain period of time, usually one year. Home owners are responsible for a per-call service fee. There is a home owner's warranty for new construction. Some developers will purchase a warranty from a company specializing in new construction for the homes they sell. A home owner's warranty will warrant the good working order of the appliances and workmanship of a new home for between one and ten years; for example, appliances might be covered for one year while the roof may be covered for several years.
Homeowner's Association -
A Homeowner's Association is a group of home owners in a particular subdivision or area who band together to take care of common property and common interests.
Homeowner's Insurance -
Homeowner's Insurancincludes hazard insurance, as well as personal liability and theft.
Hostile Takeover -
A Hostile Takeover is when a company purchases another against the will of the purchased company's management.
Inception Fees -
Inception Fees are the upfront fees that the car dealer will require you to pay, including your first monthly payment, refundable security deposit, Department of Motor Vehicle (DMV) fees, and possibly an acquisition fee. You'll have to come up with this cash upfront, even if you're getting a "no money down" lease. If you're paying a down payment, you'll have to add that in as well.
Income Replacement Policy -
An Income Replacement Policy is private disability insurance that covers the difference between what you earned prior to the disability and what you now earn doing a different job.
Income Stock -
An Income Stock is a company that tends to pay out more of its profits to shareholders (in the form of dividends) and put less toward growth.
Indemnity Plans -
Indemnity Plans are a type of health care insurance set up as a fee-for-service plan. You get something done, you pay for it. Typically there are no restrictions on care, and the plan coverage kicks in when you reach a certain deductible. Unlike an HMO, you (or the doctor's office) will also have to bill the insurance company. The nice thing about indemnity plans is that you can see the doctor you choose and seek second opinions or specialists anywhere in the country. On the other hand, it's the most expensive way to go, and not every employer offers this plan.
Index Funds -
Index Funds are stock mutual funds designed to mimic the movements of a particular index. For example, a fund trying to mimic the movement of the Standard & Poor's (S&P) 500, will either purchase every stock on the S&P 500 in the same ratio that those stocks appear on the index, or will purchase a representative sample of companies that closely approximate the index. Since index funds rarely change their holdings, they are typically cheap to hold and may do better for investors over the long haul.
Individual Retirement Account (IRA) -
An Individual Retirement Account (IRA) is an account to which any individual who earns income may contribute up to $2,000 per year. The contributions are tax-deductible, and the earnings grow tax-free although they may be taxed upon withdrawal.
Initial Public Offering (IPO) -
An Initial Public Offering (IPO) occurs when a young company hoping to finance future growth goes public to raise additional funds. Many IPOs rise dramatically the first day of the offering, then settle back down to a more reasonable share price. Some investors try to get in on the ground floor of an IPO and then sell their shares within the first day or week.
Installment Contract for Deed -
An Installment Contract for Deed refers to purchasing property in installments. Title to the property is given to the purchaser when all installments are made. For more information take a look at our [Installment Contract for Deed](http://www.thinkglink.com/installment-contract) topic page and the articles we have written on this subject.
Institutional Investors or Lenders -
Institutional Investors or Lenders are private or public companies, corporations, or funds (such as pension funds) that purchase loans on the secondary market from commercial lenders such as banks and savings and loans. Or, they are sources of funds for mortgages through mortgage brokers.
Interest is money charged for the use of borrowed funds. Usually expressed as an interest rate, it is the percentage of the total loan charged annually for the use of the funds.
Interest Rate Cap -
An Interest Rate Cap is the total number of percentage points that an adjustable-rate mortgage (ARM) might rise over the life of the loan.
Interest-Only Mortgage -
An Interest-Only Mortgage is a loan in which only the interest is paid on a regular basis (usually monthly), and the principal is owed in full at the end of the loan term.
IRS Penalty -
An IRS Penalty is a fine levied by the IRS. You may pay a flat dollar fee or a fee based on an interest charge for unpaid taxes, failure to pay taxes, failure to make estimated tax payments, failure to make federal tax deposits, or filing late.
Joint Tenancy -
Joint Tenancy is an equal, undivided ownership in a property taken by two or more owners. Under joint tenancy there are rights of survivorship, which means that if one of the owners dies, the surviving owner rather than the heirs of the estate inherits the other's total interest in the property.
A Keogh is a retirement plan for employees of unincorporated businesses or self-employed individuals. You may contribute up to 25 percent of your earned income, to a maximum of $30,000.
Landscape refers to the trees, flowers, planting, lawn, and shrubbery that surround the exterior of a dwelling.
Late Charge -
A Late Charge is a penalty applied to a mortgage payment that arrives after the grace period (usually the 10th or 15th of a month).
Lease Charge or Money Factor -
A Lease Charge or Money Factor is a complicated method that car dealers use to calculate lease payments. Similar to an interest rate, and you should multiply the money factor by 2400 to approximate the annual percentage rate of your lease. It is not negotiable, but differs from lease-to-lease, car-to-car, and company-to-company. Usually it is not disclosed - that's because car companies are not required to under Regulation M.
Lease with an Option to Buy -
A Lease with an Option to Buy is when the renter or lessee of a piece of property has the right to purchase the property for a specific period of time at a specific price. Usually, a lease with an option to buy allows a first-time buyer to accumulate a down payment by applying a portion of the monthly rent toward the down payment.
A Lender is a person, company, corporation, or entity that lends money for the purchase of real estate.
A Lessee is you, or the person leasing a vehicle or residence.
A Lessor is the landlord or leasing company, bank or finance company that leases the car or apartment to you.
Letter of Intent -
A Letter of Intent is a formal statement, usually in letter form, from the buyer to the seller stating that the buyer intends to purchase a specific piece of property for a specific price on a specific date.
Leverage is using a small amount of cash, say a 10 or 20 percent down payment, to purchase a piece of property.
A Lien is an encumbrance against the property, which may be voluntary or involuntary. There are many different kinds of liens, including a tax lien (for unpaid federal, state, or real estate taxes), a judgment lien (for monetary judgments by a court of law), a mortgage lien (when you take out a mortgage), and a mechanic's lien (for work done by a contractor on the property that has not been paid for). For a lien to be attached to the property's title, it must usually be filed or recorded with a local county government office.
Life Cycle Funds -
Life Cycle Funds are mutual funds specifically designed to mirror what many experts feel are optimum ratios of stocks and bonds throughout the different stages in your life. You may be able to choose from 3 or 4 funds, one designed for 20-30 year olds, one for 40-50 year olds, and so on.
A Listing is a property that a broker agrees to list for sale in return for a commission.
A Load is a sales charge on a mutual fund that can range from 1 to 7 percent. It might be a front-load (payable when you buy into the fund) or a back-load (payable when you cash out). You typically pay this because you want the service of a financial professional selecting and building your portfolio. Your load may decrease the longer you hold the fund. If you cashed out in the first year, you'd pay 6 percent. Cash out three years later and the load may only be 3 percent.
A Loan is an amount of money that is lent to a borrower, who agrees to repay it plus interest.
Loan Commitment -
A Loan Commitment is a written document that states that a mortgage company has agreed to lend a buyer a certain amount of money at a certain rate of interest for a specific period of time, which may contain sets of conditions and a date by which the loan must close.
Loan Origination Fee -
A Loan Origination Fee is a one-time fee charged by the mortgage company to arrange the financing for the loan.
Loan-to-Value Ratio -
The Loan-to-Value Ratio is the ratio of the amount of money you wish to borrow compared to the value of the property you wish to purchase. Institutional investors (who buy loans on the secondary market from your mortgage company) set up certain ratios that guide lending practices. For example, the mortgage company might only lend you 80 percent of a property's value.
Location is where a property is geographically situated. "Location, location, location" is a broker's maxim that states that where the property is located is its most important feature, because you can change everything about a house, except its location.
A Lock-In is the mechanism by which a borrower locks in the interest rate that will be charged on a particular loan. Usually, the lock lasts for a certain time period, such as 30, 45, or 60 days. On a new construction, the lock may be much longer.
Long-Term Care Insurance -
Long-Term Care Insurance is insurance that covers the cost of long-term care in a nursing home, other custodial care settings, or at home.
Maintenance Fee -
The Maintenance Fee is the monthly or annual fee charged to condo, co-op, or townhouse owners, and paid to the homeowner's association, for the maintenance of common property. Also called an assessment.
Management Buyout -
A Management Buyout is when the individuals running a company get together, borrow money, and buy most or all of its common shares.
Market Price -
The Market Price of a bond is determined by traders who buy and sell bonds. On any given day, your bond will be worth more or less than the face value. That's because the bond market is continually active, with traders bidding up and down the value of bonds based on the current interest rate of the day. When interest rates rise, bonds are worth less (because it takes a smaller amount of capital to earn the same amount of interest). When interest rates fall, bonds are worth more (because it takes a greater amount of money to earn the same amount of interest.)
Market Sector -
The term Market Sector refers to the categorizing of companies based on the industry in which they operate. Example sectors include technology and transportation.
Matured Bond -
A Matured Bond is a bond that has been paid back in full, or is due for full payment.
Medicaid comprises state public assistance programs to persons who are unable to pay for health care. Title XIX of the federal Social Security Act provides matching federal funds for financing state Medicaid programs.
Medicare is a program of Hospital Insurance (Part A) and Supplementary Medical Insurance (Part B) protection provided under the Social Security Act.
Medicare Supplemental Insurance (Medigap or MedSup) -
Medicare Supplemental Insurance (Medigap or MedSup) is a term used in reference to private insurance products that supplement Medicare insurance benefits.
A Merger is when two companies voluntarily join together. Sometimes mergers are really takeovers, where one company ends up becoming the dominant presence.
A Mortgage is a document granting a lien on a home in exchange for financing granted by a lender. The mortgage is the means by which the lender secures the loan and has the ability to foreclose on the home.
Mortgage Banker -
A Mortgage Banker is a company or a corporation, like a bank, that lends its own funds to borrowers in addition to bringing together lenders and borrowers. A mortgage banker may also service the loan (i.e., collect the monthly payments).
Mortgage Broker -
A Mortgage Broker is a company or individual that brings together lenders and borrowers and processes mortgage applications.
Mortgagee is a legal term for the lender.
Mortgagor is a legal term for the borrower.
Multiple Listing Service (MLS) -
A Multiple Listing Service (MLS) is a computerized listing of all properties offered for sale by member brokers. Buyers may only gain access to the MLS by working with a member broker.
Municipal Bond -
A Municipal Bond is a bond offered by a local municipality. Munis, as they are commonly known, are not taxed by the federal government.
Negative Amortization -
Negative Amortization is a condition created when the monthly mortgage payment is less than the amount necessary to pay off the loan over the period of time set forth in the note. Because you're paying less than the amount necessary, the actual loan amount increases over time. That's how you end up with negative equity. To pay off the loan, a lump-sum payment may have to be made.
Net Asset Value (NAV) -
Net Asset Value (NAV) is the value per share of a mutual fund. This is similar to a stock price.
No-Fault Insurance -
No-Fault Insurance is a legal policy adopted by some states that abolishes liability for a death or injury caused by a motor vehicle regardless of the accident's cause. An injured party cannot sue another driver unless a particular crime or hazard is proven. Drivers in states with no-fault insurance laws can buy personal injury protection, which means you pay for your injuries and the other driver pays for his or her injuries.
No-Load refers to mutual funds that charge no fees to buy in or cash out. There are other charges, however. Check the funds expense ratio to find out how much you're being charged.
Non-Cancelable Policy -
A Non-Cancelable Policy is a policy specifying that, as long as you pay your premiums on time, the insurer can't raise your premium and can't cancel your policy.
Open-End Lease -
If you have an Open-End Lease, when you bring the car back the dealer compares the actual value of the car with the residual value stated in your lease contract. If the actual value is less than the stated residual value, you make up the difference. If, by chance, the car has retained more of its value, the dealer pays you.
An Opened-Ended fund is a mutual fund that continues to welcome new investors and their cash.
Operating Expense Ratio (OER) -
The Operating Expense Ratio (OER), also known as the expense ratio, is the cost of administering and managing a mutual fund, including salaries and bonuses paid. This can run .05 to 3 percent per year.
Option to Purchase -
An Option to Purchase, also known as a Lease/Option, is when a buyer pays for the right or option to purchase property for a given length of time, without having the obligation to actually purchase the property.
Optionally Renewable Policy -
An Optionally Renewable Policy is a contract of health insurance in which the insurer reserves the right to terminate the coverage at any anniversary or, in some cases, at any premium due date, but does not have the right to terminate coverage between such dates.
Origination Fee -
An Origination Fee is a fee charged by the lender for allowing you to borrow money to purchase property. The fee -- which is also referred to as points -- is usually expressed as a percentage of the total loan amount.
Own-Occupation Policy -
An Own-Occupation Policy is a type of private disability insurance that pays if you can't work at your specific job.
Ownership is the absolute right to use, enjoy, and dispose of property. You own it!
Package Mortgage -
A Package Mortgage is a mortgage that uses both real and personal property to secure a loan.
Paper is slang usage that refers to the mortgage, trust deed, installment, and land contract.
Par is the bond's face value. So a $1,000 bond will have a par value of $1,000. The term par may be a bit confusing because even if your bond is worth $10,000, par also refers to 100, as in 100 percent of a bond's value. So you may hear that your bond cost 95, which means 95 percent of par. That means you'll get a 5 percent discount, and pay $950 for every bond with a $1,000 face value. If the bond cost 116, that means it's 116 percent of par, or cost you $1,160 for a bond with a face value of $1,000.
Partial Disability Coverage -
Partial Disability Coverage is a benefit sometimes found in disability income policies providing for the payment of reduced monthly income in the event the insured cannot work full time and/or is prevented from performing one or more important daily duties pertaining to his or her occupation.
Personal Articles Rider -
A Personal Articles Rider is coverage designed to insure property of a moveable nature. The coverage typically protects against all physical loss, subject to special exclusions and conditions.
Personal Injury Protection -
Personal Injury Protection is first-party no-fault coverage in which an insurer pays, within the specified limits, the wage loss, medical, hospital and funeral expenses of the insured.
Personal Property -
Personal Property is Moveable property, such as appliances, furniture, clothing, and artwork.
PITI is an acronym for Principal-Interest-Taxes-and-Insurance. These are usually the four parts of your monthly mortgage payment.
Pledged Account -
A Pledged Account is when borrowers who do not want to have a real estate tax or insurance escrow administered by the mortgage servicer pledge a savings account into which enough money to cover real estate taxes and the insurance premium must be deposited. You must then make the payments for your real estate taxes and insurance premiums from a separate account. If you fail to pay your taxes or premiums, the lender is allowed to use the funds in the pledged account to make those payments.
A Point is one percent of a loan amount.
POS (Point of Service) Plans -
POS (Point of Service) Plans are health insurance plans that permit an individual to choose providers outside the plan yet encourages the use of network providers. This type of plan is also known as an open-ended HMO or PPO.
Possession is being in control of a piece of property, and having the right to use it to the exclusion of all others.
Power of Attorney -
Power of Attorney is the legal authorization given to an individual to act on behalf of another individual.
PPO (Preferred Provider Organization) -
A PPO (Preferred Provider Organization) is an arrangement whereby a third-party payer contracts with a group of medical care providers who furnish services at lower than usual fees in return for prompt payment and a certain volume of patients.
Pre-Existing Condition -
A Pre-Existing Condition is a physical condition that existed before the effective date of coverage.
Preferred Stock -
Preferred Stock is a special class of stock that may have certain voting privileges. Companies typically pay a fixed, high dividend whose return is similar to what you'd get on a bond. While the price of preferred stock can rise, common stock prices typically rise faster than preferred stock.
Prepaid Interest -
Prepaid Interest is interest paid at closing for the number of days left in the month after closing. For example, if you close on the 15th, you would prepay the interest for the 15th through the end of the month.
Prepayment Penalty -
A Prepayment Penalty is a fine imposed when a loan is paid off before it comes due. Many states now have laws against prepayment penalties, although banks with federal charters claim to be exempt from state laws. If possible, do not use a mortgage that has a prepayment penalty, or you will be charged a fine if you sell your property before your mortgage has been paid off.
Prequalifying for a Loan -
Prequalifying for a Loan is when a mortgage company tells a buyer in advance of the formal application approximately how much money the buyer can afford to borrow.
Presumptive Disability -
Presumptive Disability is a type of private disability insurance that presumes its holder to be fully disabled and entitled to full benefits if he or she loses his or her sight, speech, hearing, or some other specified faculty.
Principal is the amount of money you borrow if you're getting a home loan. If you're buying a bond, the principal is the amount you're lending. Typically, you'll buy bonds with a face value of $1,000. If you buy a $1,000 bond, your principal is $1,000.
Private Mortgage Insurance (PMI) -
Private Mortgage Insurance (PMI) is special insurance that specifically protects the top 20 percent of a loan, allowing the lender to lend more than 80 percent of the value of the property. PMI is paid in monthly installments by the borrower, and is for the benefit of the lender, not the buyer.
Property Tax -
Property Tax is a tax levied by a county or local authority on the value of real estate.
Proration is the proportional division of certain costs of home ownership. Usually used at closing to figure out how much the buyer and seller each owe for certain expenditures, including real estate taxes, assessments, and water bills.
Purchase Agreement -
A Purchase Agreement is an agreement between the buyer and seller for the purchase of property.
Purchase Fee -
A Purchase Fee is a fee you'll pay in addition to the purchase option price if you do decide to purchase your leased car at the end of the lease term. Typically, it's about $250-300 and it is negotiable.
Purchase Money Mortgage -
A Purchase Money Mortgage is an instrument used in seller financing, a purchase money mortgage is signed by a buyer and given to the seller in exchange for a portion of the purchase price.
Purchase-Option Price -
The Purchase-Option Price is the price you'll pay to buy the car at the end of the lease. Typically, it's not negotiable, but it may be tied into the number of miles you're allotted each year. A car that's driven 15,000 miles a year will be less valuable than a car driven only 10,000 miles a year.
Quit Claim Deed -
A Quit Claim Deed is a deed that operates to release any interest in a property that a person may have, without a representation that he or she actually has a right in that property. For example, Sally may use a quit claim deed to grant Bill her interest in the White House, in Washington, DC, although she may not actually own, or have any rights to, that particular house.
Real Estate -
Real Estate is land and anything permanently attached to it, such as buildings and improvements.
Real Estate Agent -
A Real Estate Agent is an individual licensed by the state, who acts on behalf of the seller or buyer. For his or her services, the agent receives a commission, which is usually expressed as a percentage of the sales price of a home and is split with his or her real estate firm. A real estate agent must either be a real estate broker or work for one.
Real Estate Attorney -
A Real Estate Attorney is an attorney who specializes in the purchase and sale of real estate.
Real Estate Broker -
A Real Estate Broker is an individual who is licensed by the state to act as an agent on behalf of the seller or buyer. For his or her services, the broker receives a commission, which is usually expressed as a percentage of the sales price of a home.
Real Estate Settlement Procedures Act (RESPA) -
Real Estate Settlement Procedures Act (RESPA) is a federal statute, originally passed in 1974, that contains provisions that govern the way companies involved with a real estate closing must treat each other and the consumer. For example, one section of RESPA requires lenders to give consumers a written Good Faith Estimate within three days of making an application for a loan. Another section of RESPA prohibits title companies from giving referral fees to brokers for steering business to them.
Real Rate of Return -
The Real Rate of Return for a bond consists of two pieces: the interest you've earned on the bond and the actual market value of the bond (it could be above or below face value when you sell it). If the market value of the bond has appreciated, you may have to pay capital gains on the rise in value. The interest you earn is taxed like income.
A Realtist is a designation given to an agent or broker who is a member of the National Association of Real Estate Brokers.
A Realtor is a designation given to a real estate agent or broker who is a member of the National Association of Realtors.
Recording is the process of filing documents at a specific government office. Upon such recording, the document becomes part of the public record.
Redemption Fee -
A Redemption Fee is typically a charge that's imposed on people who redeem their shares within a short period of time. It might be 90 days or 3 years. Some funds impose a .25 percent redemption fee no matter when you cash out. Why? This is another way for funds to be profitable. But there may be some additional costs if too many people take their money out at exactly the same moment. Funds have to keep some money in cash reserves in case people want to redeem their shares. If too many people want to redeem their shares all at once, the fund would have to sell some stock, perhaps at not the most fortuitous time.
Redlining is the slang term used to describe an illegal practice of discrimination against a particular racial group by real estate lenders or insurance companies. Redlining occurs when lenders or insurance company decide certain areas of a community are too high risk. Real estate companies who redline simply refuse to give a mortgage to buyers who want to purchase property in those areas, regardless of their qualifications or creditworthiness. Insurance companies who redline refuse to insure consumers who live in certain neighborhoods.
Regulation M -
Regulation M is the revised federal rules that went into effect at the end of 1997. Regulation M standardized and simplified car leasing forms and language. While it requires dealers to disclose all sorts of information, it does not require them to disclose the money factor (also known as the lease rate).
Regulation Z -
Regulation Z is also known as the Truth in Lending Act. Congress determined that lenders must provide a written Good Faith Estimate of closing costs to all borrowers and provide them with other written information about the loan.
Replacement Insurance -
Replacement Insurance guarantees that the insurer will pay for the cost of replacing the home in its current condition up to the policy's limits. This is a less expensive form of homeowner's insurance than Guaranteed Cost Replacement Insurance (which will pay to put your home in its current condition and meet all current codes as well) and it typically won't pay to bring your home up to current standards.
The Reserve is the amount of money set aside by a condo, co-op, or homeowners' association for future capital improvements.
Residual Value -
The Residual Value is how much the car dealer says the car will be worth at the end of the lease term. Typically, this is not negotiable.
Roth IRA -
A Roth IRA allows non-deductible, after-tax contributions of up to $2,000 per year. As long as you hold the IRA for at least 5 years, the distributions are tax free. In addition, you are not required to make a minimum contribution each year, and there is no age limit for additional contributions. The Tax Relief Act of 1997 created the Roth IRA.
A Sale-Leaseback is a transaction in which the seller sells property to a buyer, who then leases the property back to the seller. This is accomplished within the same transaction.
Sales Contract -
A Sales Contract is the document by which a buyer contracts to purchase property. Also known as the purchase contract or a Contract to Purchase.
Sales Tax -
Sales Tax is a tax levied by state or local governments. In most areas, a car lease is considered the same as a purchase. So you'll pay sales tax on your purchase. That's one reason to think carefully about where you purchase or lease your vehicle. You might only pay 7.5 percent sales tax instead of 8.75 percent depending on where you buy or lease your car. And when you're talking about a $20,000 car, saving 1.25 percent means saving $250.
Savings Bonds -
A Savings Bonds is a bond backed by the U.S. government. Savings bonds (which come in different series, like EE and HH) can be purchased in small amounts, either directly from a bank, the Treasury Department, or through a broker. They're non-transferable, and are not traded as are other government offerings. In September 1998, the Government began selling an inflation-indexed savings bonds. The I-bond guarantees that your return will out-pace inflation, and is actually based on the rate of inflation plus a fixed rate of return, perhaps 3 to 3.5 percent.
Savings Incentive Match Plan for Employees (SIMPLE-401(k) or IRA) -
A Savings Incentive Match Plan for Employees (SIMPLE-401(k) or IRA) is a pension plan for employers with 100 or fewer employees (who earn at least $5,000 per year). The employer must match the employee contribution, which is limited to a dollar amount that is indexed for inflation.
Second Mortgage -
A Second Mortgage is a mortgage that is obtained after the primary mortgage, and whose rights for repayment are secondary to the first mortgage.
Seller Broker -
A Seller Broker is a broker who has a fiduciary responsibility to the seller. Most brokers are seller brokers, although an increasing number are buyer brokers, who have a fiduciary responsibility to the buyer.
Settlement Statement -
A Settlement Statement is a statement that details the monies paid out and received by the buyer and seller at closing.
Shared Appreciation Mortgage -
A Shared Appreciation Mortgage is a relatively new mortgage used to help first-time buyers who might not qualify for conventional financing. In a shared appreciation mortgage, the lender offers a below-market interest rate in return for a portion of the profits made by the home owner when the property is sold. Before entering into a shared appreciation mortgage, be sure to have your real estate attorney review the documentation.
Simplified Employee Pension (SEP-IRA) -
A Simplified Employee Pension (SEP-IRA) is a type of pension plan used by small businesses. The employer's contributions are excluded from the employee's taxable salary, and may not exceed 15 percent of the employee's salary or the current dollar amount set by the government, whichever is less.
Social Security -
Social Security provides retirement benefits, disability income, and Medicare for working individuals and their spouses. Under the Social Security Act of 1935, the government established social security and created the Social Security Administration to administer the program.
Special Assessment -
A Special Assessment is an additional charge levied by a condo or co-op board in order to pay for capital improvements, or other unforeseen expenses.
Specialty Funds -
Specialty Funds is mutual funds that specialize in one particular market sector or industry, or even a specific piece of an industry.
A Spin-off occurs when a company divides itself into several pieces, giving new shares in the company to current shareholders. Your 100 shares of stock in one company may turn into 300 shares if the company divides itself in three ways, and rewards stockholders with one share in each new company for each share currently held.
Standard Deduction -
A Standard Deduction is a deduction the IRS allows from your adjusted gross income (AGI) if you do not itemize. If you decide not to itemize your deductions, or if you can't, you may opt for the standard deduction, an amount set by the government and indexed for inflation.
Stock Broker -
A Stock Broker individual who helps consumers purchase equities, like stocks and bonds. A stock broker must be licensed.
Stock Rights -
Stock Rights are rights provided to a shareholder to purchase new shares, often at a discount. Sometimes you'll see this if you have an account at a Savings & Loan that announces it intends to go public. Account holders are offered the right to purchase shares of stock in the company before the initial public offering.
A Subagent is a broker who brings the buyer to the property. Although subagents would appear to be working for the buyer (a subagent usually ferries around the buyer, showing him or her properties), they are paid by the seller and have a fiduciary responsibility to the seller. Subagency is often confusing to first-time buyers, who think that because the subagent shows them property, the subagent is "their" agent, rather than the seller's.
A Subdivision is the division of a large piece of property into several smaller pieces. Usually a developer or a group of developers will build single family or duplex homes of a similar design and cost within one subdivision.
Subvented Lease -
A Subvented Lease is a car lease that's subsidized (typically by the auto manufacturer) in order to get rid of a certain kind of car. Subvented leases can be exceptional deals, and they are often the only way that leasing may be cheaper than owning (unless you pay cash, in which case a well-negotiated car purchase will almost certainly be cheaper than any lease you could get.
Tax Audit -
A Tax Audit is a formal examination of your tax return by IRS auditors.
Tax Bracket -
A Tax Bracket is a range of income which must pay a certain level of taxes. The higher your income, the higher your tax bracket, and the more tax you pay.
Tax Credit -
A Tax Credit is an amount by which tax owed is reduced directly. In other words, a dollar-for-dollar amount is subtracted directly from the taxes you owe.
Tax Exemption -
You may take a Tax Exemption, from your adjusted gross income for yourself, your spouse, and any dependents. The tax exemption basically excludes money from taxation.
Tax Lien -
A Tax Lien is a lien that is attached to property if the owner does not pay his or her real estate taxes or federal income taxes. If overdue property taxes are not paid, the owner's property might be sold at auction for the amount owed in back taxes.
Tax Shelter -
A Tax Shelter is an investment entered into for the primary purpose of lowering your tax burden.
Taxable Income -
Taxable Income is your gross earnings minus deductions and exclusions.
Tenancy by the Entirety -
Tenancy by the Entirety is a type of ownership whereby both the husband and wife each own the complete property. Each spouse has an ownership interest in the property as their marital residence and, as a result, creditors of one spouse cannot force the sale of the home to pay back his or her debts without the other spouse's consent. There are rights of survivorship whereby upon the death of one spouse, the other spouse would immediately inherit the entire property.
Tenants in Common -
Tenants in Common is a type of ownership in which two or more parties have an undivided interest in the property. The owners may or may not have equal shares of ownership, and there are no rights of survivorship. However, each owner retains the right to sell his or her share in the property as he or she sees fit.
Tender Offer -
A Tender Offer is made when a company wants to takeover another company. The acquiring company will offer a price per share that is typically above the market price. You will be asked to tender, or surrender, your shares for the higher price. In reality, after the tender offer is made, the market price for your stock will usually go up and match the offer (if it doesn't match the offer, there is some concern in the market that the deal may not go through).
Term (Bonds) -
When discussing bonds, Term refers to the length of time during which principal and interest payments are made. Short-term bonds run up to 3 years in length. Intermediate bonds are from 3 to 10 years in length. Long-term bonds run up to 30 years in length. Generally, the bonds that pay the highest interest rate are the long-term bonds. However, you'll only earn an extra percentage point or so on your money and have to tie is up for a long period of time. Financial planners say a better bet is to purchase intermediate-term bonds, which are more flexible.
Term (Car Lease) -
When discussing car leases, Term refers to how long the car lease lasts. Generally, you won't want to get a car lease for longer than 3 years. Too many things can start to go wrong with a leased car in it's 4th or 5th year, and the likelihood that you'll get some nicks and dings increases.
Title refers to the ownership of a particular piece of property.
Title Company -
A Title Company is the corporation or company that insures the status of title on real estate (called title insurance) at a closing, and may handle other aspects of the real estate closing.
Title Insurance -
Title Insurance is insurance that protects the lender and the property owner against losses arising from undisclosed defects or problems with the title to property.
Total Return -
Your Total Return includes your dividends plus the gain or loss in the price of the company's stock. If the stock rises 5 percent and your dividends are 2 percent, your total return is 7 percent.
Transaction Fees -
Transaction Fees are the costs mutual funds incur when they buy and sell shares of stock on the open market.
Treasuries are products offered by the federal government to raise money. The three types of treasuries are Treasury Bills (also known as a T-Bills), Treasury notes, and Treasury bonds. Uncle Sam uses the money raised from the sale of these three products to pay for social and spending programs. Collectively, this debt is our national debt. It is considered fail-proof, since it is backed by the U.S. Government.
Treasury Bills (T-Bills) -
Treasury Bills (T-Bills) are government-backed securities, with a minimum purchase price of $1,000. They are offered in 3-month, 6-month, and 12-month lengths. You buy the T-bill at a discount which, when divided by the effective cost, equals your rate of interest. (So if you purchase a $10,000 T-bill for $9,300, your interest rate is $700, $9,300=.08 or 8 percent.) The discount is deposited immediately into your account, and the rest of the face value arrives on the day the bond matures. You have the option of rolling over your T-bill for another period. Since T-bills, like all offerings from the Treasury Department are backed by the full faith and credit of the U.S. Government, they're considered just about the safest investments around.
Trust Account -
A Trust Account is an account used by brokers and escrow agents, in which funds for another individual are held separately, and not commingled with other funds.
Umbrella Liability Policy -
An Umbrella Liability Policy insures losses in excess of amounts covered by other liability insurance policies; also protects the insured in many situations not covered by the usual liability polices.
An Underwriter is one who underwrites a loan for another. Your lender will have an investor underwrite your loan.
Universal Life Insurance -
Universal Life Insurance is a flexible premium life insurance policy under which the policyholder may change the death benefit from time to time (with satisfactory evidence of insurability for increases), vary the amount or timing of premium payments, and choose the investment vehicle for his or her premiums. Premiums (less expense charges and commissions) are credited to a policy account from which mortality charges are deducted and to which interest is credited at a rate that may change from time to time.
Variable Interest Rate -
A Variable Interest Rate is an interest rate that rises and falls according to a particular economic indicator, such as Treasury Bills.
Viatical Settlement -
A Viatical Settlement is the payment of a portion of the proceeds from life insurance to an insured who is terminally ill.
Void refers to a contract or document that is not enforceable.
Voluntary Lien -
A Voluntary Lien is a lien, such as a mortgage, that a homeowner elects to grant to a lender.
A Waiver is the surrender or relinquishment of a particular right, claim, or privilege.
Warrants give you the right to buy additional shares of stock at a pre-determined price. Sometimes when you buy preferred stock or bonds of speculative companies, you get a warrant. This sounds great, but the company usually has the right to call in the warrants, forcing you to exercise them (i.e. buy stock at the current price) or receive a few cents for each warrant you hold.
Wash Sale -
A Wash Sale occurs when you sell stocks and repurchase them within 30 days prior to or after the sale.
Withholding is an ongoing deduction from your paycheck that is sent, by your employer on your behalf, to the IRS.
Withholding Allowance -
A Withholding Allowance is available for each personal and dependent exemption that you're entitled to take. You may also take additional exemptions to compensate for deductions and credits you plan to use. You may change your withholding allowances during the year if your income will be higher or lower than you planned.
Wrap Accounts -
Wrap Accounts are special accounts where your broker wraps your mutual funds in with other investments you own. The broker keeps an eye out on all of it, for a 1 to 3 percent wrap account fee. Another wrap account is a mutual fund that has no up front load, but charges a fixed percentage of assets each year to cover the cost of the commission, management and expenses.
Yield to Call -
A Yield to Call is the yield prior to a likely call event. If interest rates go down, your bond issuer will want to refinance his debt. That means he'll call in your bond as soon as he can. If your bond has 5 years until the call date, you'll want to calculate the yield to call, since the bond issuer may not let the bond mature.
Yield to Maturity -
The Yield to Maturity is the yield you would receive if you were to hold your bond until it matures and reinvest every interest payment at the interest rate on your bond. If you spend your interest payments, or reinvest them at a lower rate (like in a passbook savings account), your yield to maturity will be less. If you invest them at a higher rate, your yield to maturity will be higher.
Zero Coupon Bonds -
Zero Coupon Bonds pay zero interest throughout the bond term. However, you buy the bond at a steep discount that includes the implied interest rate. For example, a $1,000 bond paying 8 percent, might be purchased for $456. At the date of maturity, you'd collect $544 in interest. The Treasury department offers zeros (as they're commonly called), as do municipalities and some corporations.
Zoning is the right of the local municipal government to decide how different areas of the municipality will be used. Zoning ordinances are the laws that govern the use of the land.