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Keogh plan A retirement plan for self employed people which is tax deferred. People are able to deposit 20 percent of the current incomes and the funds are not available for withdrawal until age 59-1/2.
   
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Laddering Making deposits into investments, such as CDs, on staggering dates to vary the rates of return.
   
Land contract An agreement for the purchase of property where the buyer is allowed to take possession of the land while making payments but the seller holds the title until the last payment is completed.
   
Late charge A charge assessed on the borrower for not making the loan payment on time.
   
Late payment fee A fee charged to the borrower for not making the payment on time.
   
Latent defect A problem with the property that cannot be easily seen. These defects can include the presence of radon, asbestos, or hidden pests, like termites.
   
Lease An agreement where the property's owner allows a tenant to use the property in exchange for monies for a set amount of time. This may also pertain to an automobile where the borrower uses the vehicle for a set amount of time in exchange for lease payments. At the end of the lease period, the borrower gives the car back to the dealer or arranges to buy the automobile.
   
Lease extension Extending a lease on a property or car past the original end date, typically on a month to month basis.
   
Lease option The right to buy the property for a designated price at the end of the original lease period.
   
Lease purchase mortgage An option for a potential homebuyer which will allow you to lease a property with the option to buy. The mortgage is often constructed so that the monthly payment will cover the owner's rent and a little extra which is put into an account and can be used for a down payment at the end of the lease.
   
Leasehold estate A tenant's right to use the property for a specific time period.
   
Lease-like loan A loan which originates from a credit union and will save the borrower as much as 30 percent due to a big balloon payment at the end of the loan period. This loan may combine features of an auto loan and a lease. There is no down payment or security deposit required.
   
Lessee The person who signs for the lease.
   
Lessor The person who is granting a lease.
   
Letter of intent This is a formal notice that the buyer is serious about purchasing the property but is not legally enforceable.
   
Leverage The use of a large loan and a small amount of cash to make a purchase.
   
Liabilities All of the borrower's debts and legal obligations.
   
Liability insurance-auto A part of the owner's auto insurance policy that will cover injuries and damage that you, the driver, cause to other drivers and their vehicles when you are at fault in a car accident.
   
Liability insurance-home Part of the home owner's insurance policy that protects the home owner against claims from other people for personal injury or property damage.
   
LIBOR (London Interbank Offered Rate) A daily reference rate based on short-term interest rates charged among banks in the foreign money market. LIBOR rates are commonly used as a reference rate or index for adjustable-rate mortgages.
   
Lien It is the settlement of a legal claim like a mortgage debt made when a property is sold. If there is more than one debt, each debt considered a lien, is paid off in order. 
   
Life cap A limit or ceiling on the amount a borrower's interest rate can increase or decrease over the life of the loan.
   
Lifeline account An account option made mandatory in many states which allows low income customers to have a checking account or savings account. These accounts are basic accounts which incur no monthly fees and require no minimum deposit.
   
Lifetime learning credit A tax credit available for a portion of qualified tuition, education, and all related costs. This credit can be claimed for anyone is the taxpayer's family.
   
Lifetime rate cap This cap limits the amount that an interest rate can increase or decrease in an adjustable rate mortgage of the life of the mortgage.
   
Line of credit The maximum amount a financial institution is committed to lend to a borrower during a designated time period.
   
Liquid assets Property and cash that is easily accessible and can be turned into fast cash.
   
Liquidation When the debtor's property is sold and the proceeds are used to the benefit of the creditors.
   
Liquidity The ability to convert assets into cash without losing significant value.
   
Lis pendens A notice which has been filed or recorded to alert all interested parties that there is pending real estate lawsuit over the title or piece of property.
   
List price The bottom line price as established by the manufacturer. It is a good practice to not purchase items at list price.
   
Listing The green light or authorization for a real estate agent to market and sell a piece of land or home.
   
Loan application The documentation necessary for applying for a loan which lists and highlights the potential borrower's financial situation.
   
Loan application fee A fee charged by the lender in order to accept and process the loan application.
   
Loan consolidation Usually referenced in terms of student loans. This process allows students to combine several educational loans into one new loan, extending the loan repayment period, and permitting one monthly payment. This is generally a relief to newly graduated students since the combined loan repayment is substantially less than paying several loans each month.
   
Loan fraud A federal crime committed when a borrower gives false information on a loan application in order to qualify for a better loan.
   
Loan origination When a mortgage lender receives a mortgage which is secured by real property. Also described as the process by which a lender comes to obtain a loan.
   
Loan origination fee A fee assessed by the lender for underwriting a loan. This fee covers the time and preparation associated with the inception of a new loan.
   
Loan processing fee Similar to a loan origination fee. A fee charged by the lender for accepting a new loan application and gathering all the necessary documentation.
   
Loan servicing The process of collecting and managing monthly payments. Typically a separate company which processes the payments, sends statements, manages the escrow/impound accounts and makes sure that taxes and insurance premiums made on time. Sallie Mae is an example of a company who services student loan accounts.
   
Loan term The period of time in which the borrower has to repay the loan as specified in the original loan contract. Auto loans are typically 4 years, whereas mortgages have a loan term of 15 or 30 years.
   
Loan to value ratio (LTV) It is the ratio of the home loan taken to the appraised value or the sale price, whichever is lower. Lower the LTV, better are the terms offered to the borrower. 
   
Lock The guarantee you should receive from your lender stating that the mortgage rate quoted will not change for a set amount of time. You want to the lock to stay in effect until closing.
   
Lock and float A situation where a borrower can lock in an interest rate on a mortgage over a specific amount of time while also letting the rate float down if the market improves before the closing date.
   
Lock-in An agreement in which the home buyer is guaranteed a specified rate of interest, provided the loan deal is closed within a certain period of time, It also includes the cost to be paid at closing. 
   
Long term capital gain or loss Your total profit or loss from a capital asset that was yours for a period of more than 12 months.
   
Loss mitigation A situation where the lender will help the borrower when they are in danger of default to avoid foreclosure.
   
Low documentation loan A loan designed for persons' that are self employed, recent immigrants, or entrepreneurs that may not want to reveal information of their incomes. These loans require exceptional credit history, a substantial down payment, and incur a higher interest rate.
   
Lowball offer An offer on a piece of property that is way below the market value.
   
Low-down mortgages A loan where the down payment is under 10 percent. The US government has made these types of loans more available through agencies like Fannie Mae, to help more people own a home.
   
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Manufactured housing Homes that are built in a factory that can be placed temporarily or permanently on a piece of land. These homes range in style and price. They range anywhere from a trailer/mobile home to a custom looking home.
   
Margin It is the amount added to the index rate on ARM in order to get an adjustable interest rate by the lender. 
   
Market conditions Factors that influence the sales of homes in specific areas, such as interest rates, home appreciation, employment rates, and time of year.
   
Market value The price that a property is worth based on an agreeable situation between ready buyers and content sellers who have disclosed all the facts about the property.
   
Master planned community A large development where all of the amenities that make a community are factored into the planning before construction commences. The community will include parks, shopping areas, and recreation. Often, these communities will be gated.
   
Maturity It is the due date for repayment of any financial instrument or loan or bond.
   
Maturity date Regarding certificates of deposit, the date when the CD stops paying interest and the principal is given back to the buyer.
   
Maximum financing When a lender's lowest permissible down payment is made, the borrower is given a mortgage with maximum financing.
   
Mechanical systems Including the heating, cooling, plumbing and electrical systems in a house.
   
Median price As asking price for a house which is an amount where half the houses in the same area sell for less and half sell for more.
   
Member bank A bank with a membership in the Federal Reserve System.
   
Merged credit report A combined credit summary from all three credit bureaus. These credit bureaus include: Experian, Transunion, and Equifax.
   
Merit aid Education assistance given to students based on academic achievement, athletic, musical, or other talents and is not granted based on need.
   
Metes and bounds A legal description of a parcel of land based on a surveyor's findings of measurements and angles.
   
Mileage allowance or mileage limitation Mileage allowance, or mileage limitation, is the number of miles a leased vehicle can be driven while the lease is in force. If the mileage allowance is exceeded, the lessee is assessed a fee. 
   
Mileage charge Mileage charge is an assessment incurred by auto lessees who exceed the mileage limit on a leased vehicle. Typically, a lease would allow the leased car to be driven about 15,000 miles per year. 
   
Mill In reference to real estate taxes, some states use a unit of taxation that equals one tenth of one cent, or $1 on every $1,000 of taxable property value.
   
Mill rate Mill rate, or millage rate, is a property tax term referring to the amount of tax charged for each dollar of a property's assessed value. The rate is expressed in mills, where one mill equals one-tenth of one cent, or $0.001. 
   
Millage rate Millage rate, or mill rate, is a property tax term referring to the amount of tax charged for each dollar of a property's assessed value. The rate is expressed in mills, where one mill equals one-tenth of one cent, or $0.001. 
   
Min add'l invest Min add'l invest, or minimum additional investment, refers to the smallest dollar amount that can be invested or contributed to an existing account. Mutual funds, for example, usually have a minimum additional investment. 
   
Min check Min check, or minimum check, is the lowest amount for which a draft can be written. This minimum restriction might be placed on a money market fund that has limited check-writing capabilities. 
   
Min invest Min invest, or minimum investment, is the smallest investment amount allowed, expressed either in dollars, or in share quantity. Mutual funds and bonds sold to individual investors often have minimum investment requirements.
   
Min IRA invest Min IRA invest is the minimum balance required to open an Individual Retirement Account (IRA).
   
Mini perm Mini perm is a type of financing typically used for commercial, industrial, or multi-family property. Commercial properties often cannot qualify for long-term, permanent financing until they've established operating histories; mini perm loans, therefore, are used to pay off the construction loans and bridge the gap until the property can qualify for permanent financing. Mini perms are typically structured with a three- to five-year maturity. 
   
Minimum average balance to avoid fees Minimum average balance to avoid fees is a requirement placed on some deposit and checking accounts. If the average balance (i.e., the daily balance divided by the number of days) falls below the minimum level, a maintenance fee will be charged to the accountholder. 
   
Minimum balance to avoid fees Minimum balance to avoid fees is a requirement placed on some deposit and checking accounts. If the balance at any point during a certain period--usually a month--falls below the stated level, the accountholder will be assessed a maintenance fee. 
   
Minimum balance to open an account Minimum balance to open an account is a requirement placed on some deposit, checking, and investment accounts. The account cannot be opened with any amount that's less than the stated minimum. 
   
Minimum deposit Minimum deposit is the smallest amount necessary to open an investment or mutual fund account. Minimum deposit amounts can range from a few hundred to a few thousand dollars. 
   
Minimum down payment Minimum downpayment is the lowest amount of cash that a borrower must put into a home purchase in order to qualify for the mortgage loan. The minimum down payment can be determined by the lender's standard requirements, by the borrower's income, or both. 
   
Minimum payment Minimum payment is the smallest payment amount a creditor will accept on a revolving debt without charging a penalty. Minimum payments are usually calculated as a small percentage (such as 3 percent) of the outstanding balance. 
   
Minimum payment option mortgage A mortgage option where the borrower can pay an extremely low monthly payment, this usually will not cover the interest and the subsequent month's balance will be higher.
   
Mint condition Mint condition describes a used item that doesn't exhibit any signs of wear or age. Usually something described as being in mint condition has a pristine, like-new quality. 
   
Miscellaneous itemized deductions Miscellaneous itemized deductions are certain expenses that can be listed on a U.S. tax return for the purpose of reducing income tax liability. Miscellaneous itemized deductions include job-related expenses, unreimbursed work-related expenses, and tax preparation fees. These expenses can only be deducted if they're in excess of 2 percent of the taxpayer's adjusted gross income. 
   
Misselling Misselling is the practice of intentionally misleading an individual about the details of a product or service in order to make the sale. An example of misselling would be when an aggressive salesperson pushes an individual into a high-fee annuity contract, without regard for whether the annuity is really the right program for that individual. 
   
Mixed-income housing A neighborhood with varying income levels.
   
MLS (Multiple Listing Service) A shared list of information and details on properties that are available in certain areas.
   
MMA - money market account MMA, or money market account, is a high-yield checking/savings option provided by a bank. MMAs work like other checking accounts, except that they earn competitive yields, have minimum opening balances, and usually have restrictions on the number of withdrawals made within each period. If the bank is FDIC-insured, the MMA would be insured per the FDIC's coverage limitations. 
   
MMDA MMDA stands for money market deposit account. An MMDA is a high-yield checking/savings option provided by a bank. MMDAs work like other checking accounts, except that they earn competitive yields, have minimum opening balances, and usually have restrictions on the number of withdrawals made within each period. If the bank is FDIC-insured, the MMDA would be insured per the FDIC's coverage limitations. 
   
Modification A change in the terms of the loan or mortgage agreement.
   
Modified accelerated cost recovery system Also known as MACRS (pronounced "makers"), the depreciation method generally used since 1986 to figure the deductions you get over the life of tangible property. Depreciation deductions for property in use between 1980 and 1986 are determined under the Accelerated Cost Recovery System (ACRS).
   
Modified adjusted gross income (MAGI) Modified adjusted gross income, or MAGI, is a measure of income used in the preparation of a U.S. tax return. In general, MAGI is adjusted gross income that's been increased or decreased by certain deductions and credits. Exact calculations for MAGI differ depending on how it's being used.  A common use for MAGI is the determination of the deductibility of a Roth IRA, as defined in IRS Form 8606. 
   
Modified fee-for-service Modified fee-for-service is a method that insurance companies and medical groups use to compensate physicians for providing healthcare services. Under this arrangement, the physician is paid a set amount for each service, as defined by a fee schedule. In addition, the physician may be able to earn certain incentives, which are provided by the payer to keep costs low. 
   
Modified pass-through Modified pass-through describes a mortgage-backed security that guarantees interest and principal payments to certificate holders, regardless of whether the underlying mortgage payments are actually received. The payments are guaranteed by the Government National Mortgage Association, also known as Ginnie Mae. 
   
Money at call Money at call describes a loan for which the lender has the right to demand full and immediate repayment. 
   
Money factor A money factor is used to determine the lease rate for an automobile. It is the lease equivalent of the interest rate on a conventional loan. The money factor is the current annual percentage rate divided by 24.
   
Money management Money management is a general term referring to the responsible use of cash. Money management includes budgeting, saving, paying debts, and investing. The term is also sometimes used interchangeably with investment management or portfolio management, both of which refer specifically to defining and implementing an investment program. 
   
Money manager A money manager is a trained individual who's paid to research and select investments for customers. Money managers can work for individual, corporate, or institutional investors. 
   
Money market account An FDIC insured deposit account that allows a maximum of six monthly withdrawals. This allows these accounts to remain liquid and are known as stable accounts because they invest in short term debts with maturities of under a year.
   
Money market funds Mutual funds that invest in short term debts such as Treasury Bills, commercial paper, repurchase agreements, and certificates of deposits. These are not insured by the FDIC. It is possible to lose money with these funds.
   
Money market mutual fund A fund that invests in short term paper debts, designed to produce high yields without the loss of capital.
   
Monroney sticker The sticker seen on new car windows which lists the base price, the installed options, the manufacturers suggested retail price (MSRP), and the fuel economy and mileage. This sticker is required by law.
   
Monthly periodic rate The yearly interest rate divided by twelve.
   
Mop and glow Yet another way car dealers profit on buyers. An insider term used to describe the little add-ons, like paint sealant, that add no value to the car but add to the dealer's pocket.
   
Moratorium A moratorium is a holding period during which a certain activity is temporarily suspended. In bankruptcy, for example, the court puts a moratorium on debt collection, meaning debt collectors have to cease their efforts to contact the debtor. 
   
Morning loan A morning loan is a type of funding offered to brokers for the purchase of security. Funds are advanced with the promise that the broker will deliver the purchased securities to the bank later that same day. Once the securities are received, they become collateral, and the loan is converted to a broker's loan.
   
Mortality and expense risk charge Mortality and expense risk charge is a fee charged on a variable annuity contract. The charge is assessed as a percentage of the account value, and is intended to compensate the insurance company for the risks it assumes under the annuity contract. If, for example, the annuity guarantees payments for the insured's lifetime, the insurance company accepts the risk that the insured will live significantly longer than expected. 
   
Mortgage A lawful document promising a lender a certain property as security or guarantee towards payment of a debt.  Common misspellings: Mortage and Morgage
   
Mortgage acceleration clause A term in the mortgage agreement that allows the lender to demand the full balance payment under certain circumstances, such as sale of the property, default on payments or refinancing.
   
Mortgage accelerator A mortgage accelerator is a specialty mortgage loan that combines the characteristics of a checking account with the characteristics of a home equity line of credit. The borrower deposits regular income into the account, which immediately reduces the loan balance. Monthly expenses are paid out of the account, and these increase the loan balance. At the end of the month, any deposited amount that's not withdrawn to pay expenses, goes towards the loan balance as a principal repayment. Over time, the borrower accrues interest more slowly, and is therefore able to pay off the debt balance more quickly. 
   
Mortgage banker A mortgage banker is an individual or entity that originates real estate property loans in its own name. After funding, the loans might be held in the banker's portfolio, or sold to investors.    
   
Mortgage Bankers Association - MBA Mortgage Bankers Association, or MBA, is a national industry association that promotes standards of practice for professionals working in real estate finance. 
   
Mortgage banking Mortgage banking is the practice of originating real estate loans. Once the loans are originated, they're often sold by the mortgage banker to investors. 
   
Mortgage bond A mortgage bond is a corporate debt instrument that's supported by real estate property collateral. Bondholders have a claim on the collateral property if the corporate borrower defaults. 
   
Mortgage broker A mortgage company is one that has contacts with many lenders and informs the borrower about different loan options available. The mortgage broker accepts the application and processes the loan for a fee. He does not fund the loan.
   
Mortgage calculator A program that potential homebuyers can use to determine what their monthly mortgage payment will be based on principal, interest, and the terms.
   
Mortgage constant The mortgage constant is the quotient of the total annual debt payments on a mortgage divided by that mortgage's original balance. The mortgage constant is also known as the mortgage capitalization rate.  
   
Mortgage debt Mortgage debt is outstanding principal on a loan that's backed by residential real estate collateral. 
   
Mortgage excess servicing Mortgage excess servicing, on a mortgage-backed security, is the percentage of interest that's left after subtracting the MBS coupon rate and servicing and underwriting fees from the underlying mortgage note rate. The mortgage excess servicing, which would be a fraction of 1 percent, is paid to the loan servicer. 
   
Mortgage forbearance agreement Mortgage forbearance agreement is a mutually accepted arrangement between a borrower, who has defaulted, and a lender, whereby the lender agrees not to foreclose upon certain conditions. The borrower agrees to a specific repayment plan so that the loan will become current at a certain future date. Forbearance is only appropriate where the borrower fell behind in payments due to a temporary setback.
   
Mortgage index A mortgage index is the underlying benchmark that drives the interest rate on an adjustable-rate mortgage (ARM). Rates on ARMS have two components: the index and the margin. The index, which is always a published statistic, is the variable component of the rate; it moves up and down as economic conditions change. Examples of mortgage indices include the prime rate, one-year constant maturity treasury, or LIBOR. 
   
Mortgage insurance Insurance that protects the lender from incurring losses against non-payment of home loans. This is required for loans that have an LTV in excess of 80%. When the LTV is more than 80%, the borrower pays higher interest rate to the lender who then pays the premium to the mortgage insurance directly. Certain loan programs like first time home loans are covered by MI irrespective of the LTV percentage.
   
Mortgage insurance premium (MIP) The amount charged to the borrower for mortgage insurance. Depending on the situation, it may be paid upfront, monthly or annually.  
   
Mortgage interest deduction A tax savings in which the government allows homeowners to deduct home loan interest from their income before calculating their taxes.
   
Mortgage interest expense A tax term for interest paid on a loan secured by your home that is fully deductible, up to certain limits, when you itemize income taxes.
   
Mortgage lien A mortgage lien is the claim that a lender places on a property when that property is used to secure a loan. If the property owner defaults on the loan, the lender (or lienholder) has the right to foreclose and sell the property. 
   
Mortgage life insurance A policy taken out which covers the mortgage of the property if the owner dies.
   
Mortgage loan A mortgage loan is a debt instrument that is secured by real estate property. The terms mortgage loan and mortgage are used interchangeably.
   
Mortgage note A mortgage note is a document that details the terms of a promise to repay a real estate loan. The note will list the names of all borrowers and lenders, as well the loan amount, rate of interest, and structure and timing of repayments. 
   
Mortgage originator A mortgage originator is a company or individual that assists prospective borrowers through the loan application and funding process. The originator provides the initial loan funding, but may sell the loan to another entity shortly after funding. Mortgage brokers and mortgage bankers can be mortgage originators. 
   
Mortgage par rate A mortgage par rate is a reference point used by lenders to evaluate a mortgage's value. If a mortgage carries an interest rate higher than the par rate, the lender will pay a premium to purchase that mortgage. If the mortgage's rate is lower than the par rate, the lender will only pay less than face value to purchase the mortgage.
   
Mortgage pass-through security A mortgage pass-through security is an investment vehicle that's backed by a pool of mortgage loans, where the investor receives principal and interest payments (less a fee) as payments are made on the underlying mortgage loans. 
   
Mortgage pipeline A mortgage pipeline is the collection of loans that have been approved and locked in by the mortgage originator, but not yet funded. Mortgage loans are taken out of the pipeline if the borrower backs out, or if the loan funds. Upon funding, the loans are either sold on the secondary market, or placed in the originator's portfolio.
   
Mortgage pool A mortgage pool is a group of real estate loans that are used as collateral to support a mortgage-backed security, or MBS. Mortgage pools often contain loans that have similar maturities and terms, but the pool can also be more diversified for complex securities. 
   
Mortgage rate Mortgage rate is the percentage used to calculate interest expense on a real estate loan. 
   
Mortgage rate lock A mortgage rate lock is an agreement between a prospective borrower and lender that the mortgage loan will be available to the borrower at the stated interest rate for a certain period of time. If market rates change before funding, it doesn't affect the locked mortgage loan. 
   
Mortgage rate lock deposit A mortgage rate lock deposit is a non-refundable amount that a lender will charge a prospective borrower to guarantee a certain interest rate on a mortgage loan, under the condition that the loan funds within a certain timeframe. Once the loan funds, the deposit is credited back to the borrower. Not all lenders charge mortgage rate lock deposits.  
   
Mortgage rate lock float down A mortgage rate lock float down is a type of deposit that a prospective borrower can put down to fix the interest rate on a mortgage loan. Rate locks are put in place after the loan is approved and before the loan funds. A rate lock with a float down option protects the prospective borrower from rate increases, but also allows the borrower to take advantage of rate decreases that occur prior to funding. This arrangement is more expensive than a conventional rate lock deposit, which merely fixes the rate at a set value. 
   
Mortgage recast A mortgage recast is a permanent alteration of a mortgage's payoff structure. Some mortgage loans allow for recasting under certain situations, such as when the borrower is financially distressed. In this case, the maturity could be extended, or the interest rate could be reduced. Mortgages that allow unpaid interest to be added into the principal balance (e.g., option ARMs), have to be recast so that the debt is eventually repaid.   
   
Mortgage refinance The option to pay off an old loan with a new one. This typically saves the borrowers money in terms of a lower interest rate or lower payments. The borrower may also opt to get cash out of his or her equity.
   
Mortgage REIT A mortgage REIT (real estate investment trust) is an entity that invests in real estate property loans. The REIT may act as a mortgage originator, or purchase the loans on the secondary market. Mortgage REITs obtain their equity capital by selling shares to investors who want to participate in the REIT's professionally managed portfolio.  
   
Mortgage risk Mortgage risk is the likelihood that the borrower on a real estate property loan will not make the debt payments as promised. 
   
Mortgage servicing Mortgage servicing is the process of managing the administrative details of a mortgage loan. These details include collecting principal and interest payments, forwarding repayments to the mortgage lender (if the lender is not the servicer), managing escrow accounts, making payments to insurance companies and tax collectors, etc. Mortgage servicers earn a fee. Also, the rights to service a loan can be bought and sold, just as the loan itself can be bought and sold. 
   
Mortgage servicing rights - MSR Mortgage servicing rights, or MSR, is a claim on the responsibility to administer a mortgage and earn the resulting fee. Mortgage servicing involves collecting principal and interest payments, forwarding repayments to the mortgage lender (if the lender is not the servicer), managing escrow accounts, making payments to insurance companies and tax collectors, etc. Mortgage servicing rights can be bought and sold. 
   
Mortgage-backed certificate A mortgage-backed certificate is a security that allows investors to participate in a portfolio of mortgage loans. The security is supported by an underlying pool of mortgages, so that investors earn income as repayments are made on those mortgages. Mortgage-backed certificates are also known as mortgage-backed securities (MBS). 
   
Mortgage-backed securities - MBS Mortgage-backed securities, or MBS, are investment vehicles that allow investors to participate in a portfolio of mortgage loans. The security is supported by an underlying pool of mortgages, so that investors earn income as repayments are made on those mortgages. Mortgage-backed securities are also known as mortgage-backed certificates.
   
Mortgage-backed security A mortgage-backed security, or MBS, is an investment vehicle that allows investors to participate in a portfolio of mortgage loans. The security is supported by an underlying pool of mortgages, so that investors earn income as repayments are made on those mortgages. Mortgage-backed securities are also known as mortgage-backed certificates. 
   
Mortgagee The mortgage lender who recieves the mortgage as a pledge for repayment of the loan. 
   
Mortgage-interest deduction Mortgage-interest deduction is an IRS-defined tax break available to homeowners who have a mortgage loan. Mortgage interest is normally deductible if the related financing is used to purchase or improve a primary or secondary home. 
   
Mortgager A mortgager is the borrower on a real estate property loan. 
   
Mortgagor The mortgage borrower who gives the mortgage as a pledge for repayment.
   
Motivated buyer A buyer who is in a hurry to buy property.
   
Motivated seller A seller who has an urgent reason to sell their property quickly.
   
Move up buyer A buyer who is moving into a more expensive house.
   
Move-in condition A house that is ready for new owners to move in.
   
Move-up buyer A move-up buyer is a prospective homebuyer who owns a home already, but wants to replace that property with a larger, or more expensive home. 
   
Moving expenses Expenses accumulated from moving oneself, your family and possessions due to a job. These expenses are tax deductible. Save all of your receipts from the move.
   
MSRP Acronym which stands for Manufacturer's Suggested Retail Price.
   
Multidwelling property A multidwelling property has more than one living unit on a single plot of land. 
   
Multifamily mortgage A loan used to buy an apartment building and where the property is collateral.
   
Multiple Listing Service - MLS Multiple Listing Service, or MLS, is a marketing organization comprised of real estate brokers who agree to pool their home listings. The MLS makes the home search more efficient for home seekers, and provides brokers with access to a larger audience.  
   
Municipal housing inspector An employee of the government who is sent out to inspect homes that are under construction to ensure that the contractors are building to code.
   
Mutual fund A mutual fund is a professionally managed portfolio of securities that builds capital by selling shares to investors. Mutual funds give the individual investor access to a diversified, regulated portfolio. The fund publishes its investment strategy and objective along with its historic performance in a prospectus. Gains or losses in the portfolio are shared by the shareholders/investors. 
   
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Naked call A naked call is the offer of a call option for a security that's not owned. If the security's trading price changes such that the exercise price on the option represents an attractive investment, the option seller may have to buy the shares on the open market and sell them at a loss to the option holder. For this reason, selling naked call options is a very risky strategy. 
   
Named perils insurance policy A named perils insurance policy is a type of homeowner's insurance, where the property is covered against damage resulting from specific circumstances, such as fire or theft. A named perils policy provides a more specifically defined set of coverages relative to a conventional, broad coverage policy. 
   
National Association of Insurance Commissioners - NAIC The National Association of Insurance Commissioners (NAIC) is the organization of insurance regulators from the 50 states, the District of Columbia, and the five U.S. territories. The NAIC provides a forum for the development of a uniform policy when uniformity is appropriate.
   
National Association of Investors Corporation - NAIC National Association of Investors Corporation, or NAIC, is a non-profit entity that provides education, tips, and resources pertaining to the practice of investing. The NAIC is comprised of investors, investing groups, individuals, and corporations. 
   
National Association Of Mortgage Brokers - NAMB National Association of Mortgage Brokers, or NAMB, is a U.S. trade association that educates, sets standards for, and represents the interests of mortgage brokers. Mortgage brokers are individuals or entities that assist mortgage applicants in obtaining home financing. 
   
National Association Of Real Estate Investment Trusts - NAREIT National Association of Real Estate Investment Trusts, or NAREIT, is a U.S. trade organization that acts as the voice of REITs and other publicly traded real estate companies. The NAREIT community is comprised of REITs and businesses and individuals who operate in the REIT and related industries. 
   
National Automobile Dealers Association Often referred to as NADA. Publishes an Official Used Car Guide that is helpful to customers by supplying retail prices for most used cars and provides car dealers with a confidential list of trade in values.
   
National bank These banks are chartered by our government and it is mandatory that they are members of the Federal Reserve System.
   
National Credit Union Association National Credit Union Association, or NCUA, is the chartering agency for federal credit unions in the U.S. The NCUA also manages the National Credit Union Share Insurance Fund (NCUSIF), and promotes consumer education through a variety of programs. The NCUSIF insures consumer deposits that are held in credit unions, just as the FDIC does for banking institutions.   
   
National Credit Union Share Insurance Fund The National Credit Union Share Insurance Fund (NCUSIF) insures consumer deposits held in credit unions, just as the FDIC does for banking institutions.   
   
National Do Not Call Registry By calling 1-888-382-1222, you can register your phone numbers so that telemarketers cannot call you for a period of five years.
   
National Foundation for Consumer Credit National Foundation for Consumer Credit, or NFCC, is a non-profit organization that accredits consumer credit counseling agencies.  
   
National issuers National issuers are large banking entities that offer consumer credit cards, among other services. Bank of America, for example, is a national issuer. 
   
National Vehicle Leasing Association  
   
NCUA NCUA stands for National Credit Union Association. The NCUA is the chartering agency for federal credit unions in the U.S. The NCUA also manages the National Credit Union Share Insurance Fund (NCUSIF), and promotes consumer education through a variety of programs. The NCUSIF insures consumer deposits that are held in credit unions, just as the FDIC does for banking institutions.   
   
NCUSIF NCUSIF stands for National Credit Union Share Insurance Fund (NCUSIF). The NCUSIF insures consumer deposits that are held in credit unions, just as the FDIC does for banking institutions.
   
Need What the cost of a higher education is minus the expected family contributions and outside resources, like scholarships and grants.
   
Need-based aid Financial resources given to students based on their financial status and expected contributions as determined by the Federal Application for Student Aid (FAFSA).
   
Need-based pricing A method of pricing a home based on what the owner wants to get for the property without regard to what other homes are selling for. This method is not commonly advisable.
   
Needs approach The needs approach is a type of analysis that estimates how much life insurance an individual requires. The analysis estimates the expenses that will have to be covered if the insured were to pass, including funeral costs, legal fees, mortgage expenses, debt payments, future living expenses, etc. 
   
Needs-based pricing Needs-based pricing is one method of establishing an asking price for an object that's to be sold. In real estate, for example, a seller might price the home to recover the initial purchase price, plus the cost of any renovations. Unfortunately, if this asking price is higher than what the market will bear, the home will not sell. 
   
Negative amortization This happens when the interest due on the loan is more than the monthly payments. The balance unpaid interest is added to the balance of the loan. In negative amortization the loan of the borrower increases and thus he ends up owing more than the original loan. 
   
Negative amortization limit Negative amortization limit is a cap on the amount of accrued interest that can be added to the principal balance of a loan that allows negative amortization. Negative amortization occurs when a loan's minimum payments are less than that period's accrued interest.  The shortfall is added into the loan balance at the end of each period. The limit is usually defined as a percentage of the opening loan balance. 
   
Negative carry Negative carry occurs when the cost to finance an investment purchase exceeds the yield produced by the investment. For example, if an investor borrows money at 8 percent interest, and uses those funds to purchase a bond that pays 5 percent interest, the investor would be losing 3 percent interest on the investment. 
   
Negative equity Negative equity occurs when the value of an asset securing a loan dips below the loan balance. For example, an individual could take out a mortgage loan to finance 100 percent of a home purchase. If the home's value subsequently drops, due to recession, for example, the homeowner would have negative equity. Selling the home would require the homeowner to pay out of pocket to cover the difference between the sales price and the loan balance. 
   
Negative equity financing A situation when a new car buyer owes more on their trade in than the car is worth.
   
Negative points Negative points are used by a lender to rebate either a mortgage broker, or a mortgage borrower, for a mortgage that carries a higher-than-par interest rate. This rebate might be paid as a fee to the mortgage broker, or can be paid to the borrower to offset closing costs. No-cost mortgage loans use negative points; the borrower essentially trades a higher interest rate for lower upfront costs. 
   
Negative yield curve A negative yield curve describes an economic environment characterized by long-term yields being lower than short-term yields. A simple example of this is when a five-year CD pays 3 percent, and a six-month CD pays 4 percent. Negative yield curves often precede economic recession. The negative yield curve is also called an inverted yield curve. 
   
Negative-equity financing Negative-equity financing is a loan that's funded for an amount that exceeds the value of the collateral asset. This can happen with car loans; a buyer might want to trade in a vehicle that's depreciated below the outstanding loan balance. The new auto loan would have to cover the cost of the new car, plus the difference between the old loan balance and the old vehicle's trade-in value. 
   
Negatively amortizing loan A negatively amortizing loan is a financing arrangement where the minimum periodic payments due are less than the interest accrued in the same period. The unpaid interest is added into the loan, thus increasing the principal balance. A loan with this structure will have some limit on the amount of negative amortization that can occur. After that limit is reached, the borrower will have to make fully amortizing payments. 
   
Negotiable instrument A negotiable instrument is a written document that states a promise to pay the holder. Checks, acceptances, and bills of exchange are negotiable instruments. 
   
Negotiable order of withdrawal (NOW) account A negotiable order of withdrawal (NOW) account is an interest-earning bank deposit account against which the accountholder can write drafts. 
   
Nellie Mae An affiliate of Sallie Mae loan servicing. A large non profit provider of student loans under the Federal Family Education Loan Program.
   
Nest egg Nest egg is a slang term for an amount of money that's saved for a special purpose. Individuals commonly build nest eggs for things like college tuition, retirement, or a new home purchase. 
   
Net cash flow Investments that generate income after the principal, interest and insurance expenses have been paid.
   
Net debt to assessed valuation Net debt to assessed valuation is a measure of the financial health of a municipality. As such, it's an important metric in evaluating the risk of bonds issued by that municipality. The ratio is calculated by the value of the municipal's net debt divided by the combined taxable value of properties in that municipality's jurisdiction. 
   
Net debt to estimated valuation Net debt to estimated valuation is a measure of the financial health of a municipality. As such, it's an important metric in evaluating the risk of bonds issued by that municipality. The ratio is calculated by the value of the municipality's net debt divided by the estimated market value of property in that municipality's jurisdiction. 
   
Net income The amount left of your income after taxes have been paid.
   
Net interest margin securities - NIMS Net interest margin securities, or NIMS, are investment vehicles that pay investors the excess cash flows generated from the repayment of an underlying group of mortgage loans. 
   
Net operating loss (NOL) A net operating loss (NOL) occurs when a business is unprofitable from a tax standpoint. NOLs can be used to recover past taxes paid or carried forward to offset future taxes. 
   
Net worth The total sum of all of your assets minus all debts. Assets include your home, car, investments, etc. Debts include mortgages, credit cards, and loans.
   
New home sales New home sales is an economic indicator that tracks the number and prices of new homes sold during a month. The new homes sales metrics are published by the U.S. Department of Commerce's Census Bureau. 
   
NFCC (National Foundation for Credit Counseling) An organization that educates consumers about using and managing credit. This nonprofit company is the parent group for Consumer Credit Counseling Services.
   
Niche banks Niche banks are financial institutions that target a specific customer base. For example, a bank that aligns its marketing messages and product offerings to attract people who enjoy extreme roller coasters would be a niche bank. 
   
Nigerian Scam Nigerian scam is the name of a prevalent hoax that lures an individual into handing money over to a stranger. The scam often involves an email letter that describes a huge cash commission; the commission is said to be available to the person who helps facilitate a large monetary transfer. The scammer will ask for money upfront to cover transaction costs. If the money is provided, the scammer will either try to get more money, or simply disappear. 
   
NIMBY (Not In My Backyard) NIMBY stands for Not In My Backyard. The term refers to the tendency for individuals to oppose having certain developments located near their homes, even though they may not be opposed to those developments in theory. Consider a halfway house, for example; residents might argue against having a halfway house located next door, even if they aren't uniformly opposed to halfway houses in general. 
   
No cash out refinance A home mortgage for a lower interest rate in an amount that doesn't exceed closing costs.
   
No documentation mortgage - no doc A no documentation mortgage, also called a no doc, is a real estate property loan that doesn't require the borrower to present paperwork to verify his income during the approval process. No doc mortgages are more expensive than fully documented mortgages due to the chance that the borrower might overstate his earnings. 
   
No fault insurance No fault insurance is a plan that provides accident coverage to the insured, regardless of who caused the incident. Some U.S. states have no-fault auto insurance laws, where insureds recover damages from their own insurance companies. Such a system eliminates the need to sue the other party and establish fault. 
   
No income/no asset mortgage - NINA A no income/no asset mortgage, or NINA, is a real estate property loan that can be approved without documentation that verifies the borrower's regular earnings and asset base. Usually, the lender will verify the borrower's employment. NINAs are more expensive than traditional mortgage loans, due to the risk that the borrower will overstate his qualifications to obtain a loan approval. 
   
No-cost loan No-cost loans are loans where the lender may not directly charge the borrower like appraisal, recording, settlement fees etc. This has to be clarified with the lender before taking the loan. The borrower has to pay a higher interest rate for a no-cost loan. 
   
No-doc loan A shortened term for “No documentation loan”. When a borrower supplies a minimum amount of information and the lender makes their decision based on credit history and the size of the down payment. These loans typically have a higher interest rate.
   
No-documentation loan When a borrower supplies a minimum amount of information and the lender makes their decision based on credit history and the size of the down payment. These loans typically have a higher interest rate.
   
No-fee mortgage A no-fee mortgage is a real estate property loan that doesn't have any upfront fees or closing costs. Generally speaking, a no-fee mortgage will have a slightly higher interest rate than a traditional mortgage.
   
No-lien affidavit A no-lien affidavit is a written statement that a particular property has no claims on the title. The no-lien affidavit is signed by the property owner. 
   
Nominee recipient A nominee recipient is a U.S. taxpayer who receives a 1099-DIV or 1099-INT for dividend or investment earnings that partially belong to another party or parties. The nominee recipient must provide the IRS and the other parties with the breakdown of each party's taxable earnings. 
   
Non performing asset The term used when an asset in no longer accruing interest.
   
Non-amortizing loan A non-amortizing loan is structured with interest only or minimal principal payments, such that the balance is not steadily paid down to zero at maturity. At some point, the borrower will need to refinance the principal amount, or make a large balloon payment. 
   
Non-Assumption clause statement in a mortgage contract forbidding the assumption of the mortgage by another borrower without the prior approval of the lender.
   
Non-callable Non-callable describes a financial instrument, such as a preferred stock or bond, that can't be redeemed by the issuer before a specified maturity date. The non-callable feature is attractive from an investor's standpoint because it eliminates prepayment risk.  
   
Non-conforming loan A non-conforming loan is a debt arrangement that doesn't meet certain defined standards. Most often the term is used in reference to mortgages; a non-conforming mortgage doesn't meet federal standards that qualify a loan for repurchase or guarantee by Fannie Mae and Freddie Mac.
   
Non-contestability clause A non-contestability clause is legal verbiage that punishes a beneficiary for attempting to dispute a will. Such a clause may also be used in a life insurance policy to prohibit the insurance provider from denying payment due to an error on the application.  Usually, the clause gives the insurance provider a limited time period for contesting a claim. Non-contestability clauses, particularly with respect to wills, don't always hold up in court. 
   
Nondischargeable debt Nondischargeable debt is an obligation that can't be wiped away by a bankruptcy court. Bankruptcy courts aren't authorized to remove a debtor's personal obligation for tax claims, child support claims, alimony claims, and other specified debt types. 
   
Non-financial asset A non-financial asset is a physical item of worth, such as real estate, vehicles, or equipment. The value of a non-financial asset is derived from its physical qualities. This compares to financial assets, such as stocks or bonds, which are intangible in nature. 
   
Non-liquid asset A property or possession that cannot easily be turned into cash.
   
Non-owner occupied Non-owner occupied describes a residential property that's not the owner's primary or secondary residence. Usually, the term is applicable to a single-family home that's rented out. The description is important from a mortgage standpoint, because lenders perceive a non-owner occupied property mortgage as being riskier than an owner-occupied property mortgage. 
   
Nonpassive income Nonpassive income describes earnings that are actively generated, such as wages and business profits where the taxpayer materially participates in the business operations. This compares to passive income, which is generated through investment vehicles. The classification of earnings as nonpassive or passive is important in the calculation of income taxes. 
   
Nonpayroll withholding Nonpayroll withholding is a term for prepaid income tax payments related to investment income, gambling winnings, and other non-wage earnings. 
   
Nonperforming asset A nonperforming asset is a lending and leasing term used to describe an obligation that's not being paid as promised. While loans and leases are liabilities from the consumer's perspective, they're assets from the lender's perspective. When a debtor stops making payments as promised, the asset is no longer producing the desired results for the lender. The term can also be used more generally in reference to any asset that's not generating income. 
   
Nonproductive loan A nonproductive loan is a commercial debt obligation that doesn't enhance or improve the production levels of an economy. A loan that restructures a company's existing debt would be nonproductive, while a loan that finances the construction of a new manufacturing facility would be productive. 
   
Non-qualified stock options Non-qualified stock options, or NSOs, are a form of employee compensation that give the employees the right to purchase the employer's stock at a stated price. The non-qualified descriptor means that these options are not eligible for deferred tax treatment, and a tax event occurs in the year the employee exercises the option. The employee is taxed on the difference between the market price of the stock and the exercise price. 
   
Non-qualifying investment A non-qualifying investment is any asset purchased for financial gain that's not eligible for preferential tax treatment. Securities held within an IRA, for example, qualify for certain tax advantages, while a regular savings deposit does not. 
   
Non-recurring closing costs The fees paid at the close of a real estate settlement. The fees cover loan origination, the title insurance, escrow fees, and credit report management.
   
Nonrefundable credit A nonrefundable credit reduces tax liability dollar-for-dollar, but can't reduce tax liability to less than zero. In other words, a nonrefundable tax credit might reduce one's tax liability to zero, but it would never result in the government owing money back to the taxpayer. 
   
Nonresident alien A nonresident alien is an individual who doesn't live in the U.S., and is not a citizen of the U.S. Nonresident aliens are taxed by the U.S. on income generated from U.S. sources. 
   
Non-revolving credit card A non-revolving credit card is a credit account that requires payment of the full balance outstanding at the end of each billing period. 
   
Nontaxable distribution A nontaxable distribution is a payment made by a company to its shareholders; this payment is not treated as income or as a regular dividend. Instead, the payment is accounted for by the shareholder as a reduction in cost basis. The tax effect of the distribution will then be realized when the share is sold. 
   
No-ratio mortgage A no-ratio mortgage doesn't require the calculation of the borrower's debt-to-income ratio during the approval process. The lender will, instead, base the mortgage underwriting on other factors, such as the borrower's downpayment and credit history. This may be appropriate in cases where the borrower has a volatile income stream. No-ratio mortgages are considered riskier than conventional mortgages and, therefore, are more expensive. 
   
Normal yield curve A normal yield curve is an interest rate environment where long-term debt instruments (such as bonds) exhibit higher returns than similar short-term debt instruments. A normal yield curve is also called a positive yield curve. 
   
Note A legal document stating the obligation of the borrower to repay the stated sum of money at a specified interest rate at a specified date or on demand. 
   
Note loan A note loan is a debt facility that's not supported by collateral. 
   
Note rate A percentage that a borrower pays for the use of the money. Also expressed as the annual percentage rate as disclosed in the terms of the loan.
   
Notice of assessment - NOA Notice of assessment, or NOA, is a yearly tax statement sent by a taxing authority to taxpayers. U.S. property owners receive notices of assessment for property taxes owed. Other taxing authorities, such as the Australian Taxation Office and Canada Revenue Agency, send notices of assessment for income taxes. 
   
Notice of default A documentation that is made public that states that the borrower is in default and legal action may be taken. There are many options available to borrowers to help them avoid this situation.
   
Notice of sale A notice of sale is an official announcement of an upcoming sale transaction. Most often, the term is used in reference to foreclosure, where the lender is required to announce its plans to sell off the collateral. A municipal bond issuer may also issue a notice of sale as a way of requesting bids from prospective underwriters. 
   
Notional principal amount Notional principal amount, in an interest rate swap contract, is the hypothetical, agreed-upon amount used to calculate interest payments owed to each party to the agreement. In a swap contract, the notional principal amount is not actually transferred from one party to another. 
   
Novation Novation is the replacement of one agreement or obligation with another, where all parties to a contract agree to the change. Novation might be used to transfer an obligation to another party, or to replace an old debt with a new one. 
   
NOW account A NOW, or negotiable order of withdrawal, account is an interest-earning, bank deposit account against which the accountholder can write drafts. 
   
NSF An acronym for non sufficient funds. An NSF is issued by a bank when there is not enough money in the account to cover the amount of the check or transaction.
   
Number of free transactions per month Number of free transactions per month sets a limit on how many account transactions a depositor is allotted during a one-month period. If the accountholder requests transactions in excess of the stated amount, she will be charged an extra fee for each extra transaction. Accounts that specify a number of free transactions per month usually have lower maintenance fees relative to accounts that offer unlimited free transactions. 
   
Nuncupative will A nuncupative will is an individual's verbal statement describing how he would like his personal property distributed after his death. Nuncupative wills must have at least two witnesses, but are still difficult to enforce. 
   
Nursing home A nursing home, also called a long-term care facility, is a licensed, medically-staffed residence for terminally ill or invalid individuals. 
   
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Obligation An obligation, in general, is any binding duty or promise. In lending, an obligation is the promise to repay a financial debt. Leaving an obligation unfulfilled usually has legal consequences.  
   
Obligor Obligor is synonymous with debtor, meaning it's an individual or business that owes money to another party. 
   
Offer in compromise An offer in compromise is a means of resolving back-due taxes, where the taxpayer makes one payment to the IRS that's less than the amount of the taxes due. The IRS accepts offers in compromise only when it's highly unlikely that the taxpayer will be able to pay off the full balance, even under an installment plan. 
   
Offering An offering is the issuance of a security, such as stock or bond shares, for purchase by investors. If the security is being issued for the first time, the offering is called an initial public offering or IPO. 
   
Office of Comptroller of the Currency Office of Comptroller of the Currency, or OCC, is the U.S. entity that regulates national banks and supervises federal branches of foreign banks. 
   
Office of Federal Housing Enterprise Oversight - OFHEO The Office of Federal Housing Enterprise Oversight, or OFHEO, is the U.S. regulatory entity that supervises Fannie Mae and Freddie Mac. The OFHEO's main task to monitor and support the financial strength of these entities, which is crucial to the strength of the U.S. mortgage industry. OFHEO is also responsible for setting conforming loan limits each year. 
   
Office of Thrift Supervision Office of Thrift Supervision, or OTS, is a U.S. federal entity that charters and oversees savings and loan banks. The OTS conducts audits and other inspections to ensure that its member banks are in compliance with government regulations. 
   
Offline debit card An offline debit card is a plastic card that functions like a Visa or MasterCard credit card, but pulls funds from the accountholder's checking account. If the offline debit card carries a Visa logo, for example, it can be used at all merchants who accept Visa credit cards. The descriptor "offline" refers to how the transaction is processed; the purchase amount is not immediately processed through the linked account, but posts one to three days later. 
   
Old Age, Survivors and Disability Insurance Program - OASDI Old Age, Survivors and Disability Insurance Program, or OASDI, is the formal name for the U.S. Social Security program. OASDI provides retirement and disability income, veteran's pensions, and other public benefits. 
   
On account On account describes a partial payment that's applied to reduce a debt balance.  
   
One year adjustable A mortgage whose annual interest rate changes yearly. The rate is chosen by the lender based on the index and margin.
   
One-year adjustable One-year adjustable describes a debt instrument that experiences an annual interest rate change. Most often, the term is used in reference to mortgage loans, where the interest rate is reset annually in accordance with the movement of an underlying benchmark rate. 
   
One-Year Constant Maturity Treasury - 1-Year CMT One-year Constant Maturity Treasury, or 1-year CMT, is an index that's published daily by the U.S. Treasury. The index value is calculated by adjusting the yields of recently auctioned U.S. Treasury bills and notes of varying maturities to the equivalent of a one-year yield. 
   
One-Year Treasury Constant Maturity One-year Constant Maturity Treasury, or 1-year CMT, is an index that is published daily by the U.S. Treasury. The index value is calculated by adjusting the yields of recently auctioned U.S. Treasury bills and notes of varying maturities to the equivalent of a one-year yield. 
   
Online banking Online banking is the process of viewing accounts, and requesting account transactions, by way of the Internet. Often, many of the services offered in the bank branch can be transacted online also. 
   
Online bill payment Online bill payment is a banking service that allows customers to initiate the sending of checks to creditors via the Internet. Most online bill payment services allow the customer to store payment information so they can easily pay routine bills out of their checking accounts, without the burden of writing checks and stamping envelopes. 
   
Online debit card An online debit card is a plastic card that functions like a Visa or MasterCard credit card, but pulls funds from the accountholder's checking account. If the online debit card carries a Visa logo, for example, it can be used at all merchants who accept Visa credit cards. The descriptor "online" refers to how the transaction is processed; when the accountholder presents the card for purchase, the money is immediately deducted from the linked account.
   
On-the-spot loan An on-the-spot loan is an already approved line of credit that allows the borrower to take a draw of funds without additional approval required. 
   
Open access Open access, also called open panel, describes a health plan that allows the insured to consult another healthcare provider in the insurance network without a referral. 
   
Open house A means of advertising and marketing the property that is for sale. The real estate agent markets the home by inviting buyers in to see the interior and ask questions without making an appointment.
   
Open listing When a property is marketed by several real estate agents looking for a commission on the listed property,
   
Open mortgage An open mortgage is a real estate property loan that doesn't have prepayment penalties. 
   
Open panel Open panel, also called open access, describes a health plan that allows the insured to consult another healthcare provider in the insurance network without a referral. 
   
Open-end credit An open-end credit is the same thing as a revolving credit line; it's an agreement between a lender and a borrower where the borrower can borrow, pay down, and then re-borrow the funds up to an approved limit. 
   
Open-end lease A lease agreement where the person holding the leased property is obligated to purchase the property at the end of the lease term. May also be called finance lease.
   
Open-end mortgage An open-end mortgage is a real estate property loan that allows the borrower to borrow, pay down, and then re-borrow funds up to an approved debt limit. 
   
Operating lease An operating lease is an arrangement that allows the lessee to acquire and use property, but doesn't transfer ownership rights of the property to the lessee. From an accounting standpoint, an operating lease is treated as a rental expense. 
   
Option A legal agreement giving someone the rights to sell, buy, or lease the property under certain terms for a specific period.
   
Option arm Adjustable rate mortgages that offer flexibility unavailable in any other loan offer. The borrower is able to choose between loan plans that best fit their needs and financial situations. These are excellent options for people who are self employed or who work on commission because there is some flexibility on how much you pay each month.
   
Optionally renewable Optionally renewable describes an insurance feature that allows the insurance provider to cancel the policy at certain points in time, such as on the anniversary of the policy effective date. 
   
Options Features that are added to the car by the dealer. These can be valuable options like a CD player, or add-ons that add no value to the car but add cash to the dealers pocket like undercoating and paint sealant.
   
Oral agreement An oral agreement is a binding promise or arrangement made without written documentation. From a legal perspective, an oral agreement is difficult to prove. They're also invalid in real estate transactions. 
   
Ordinary annuity An ordinary annuity is a series of recurring, fixed payments that continue over a specified amount of time. 
   
Ordinary dividends Ordinary dividends are profit distributions made by a company to its shareholders. The recipient of ordinary dividends must pay taxes on the amounts received. 
   
Ordinary income Ordinary income is a tax term that describes any income earned other than capital gains. Examples of ordinary income include wages, tips, interest income, and dividend payments.  
   
Ordinary interest Ordinary interest, also called simple interest, is calculated under the assumption that a year has 360 days. 
   
Ordinary shares Ordinary shares represent non-preferred ownership rights in a corporation. The owner of an ordinary share, called a shareholder, has voting rights and is entitled to dividends, but only after dividends are paid to the preferred shareholders. If the company is liquidated, ordinary shareholders don't receive proceeds until after bondholders and preferred shareholders have been paid. 
   
Original principal balance The amount of the original amount of money borrowed.
   
Origination Origination is the series of steps that leads to the funding of a mortgage loan. These steps include application, verification, loan approval, loan preparation, etc. 
   
Origination fee It is a certain percentage of the loan charged by the lender to prepare and process the loan documents including appraisal of property, credit and cheks etc. 
   
Origination points Origination points describe an upfront fee that a borrower pays to a mortgage lender for its role in preparing the loan for funding. Each origination point is equivalent to 1 percent of the loan amount. Origination points are set by the lender, usually based on the borrower's qualifications, and can sometimes be negotiated.  
   
OTS OTS, or Office of Thrift Supervision, is a U.S. federal entity that charters and oversees savings and loan banks. The OTS conducts audits and other inspections to ensure that its member banks are in compliance with government regulations. 
   
Outpatient Outpatient is a person receiving healthcare services that doesn't require an overnight stay. 
   
Outstanding Outstanding describes something that's unsettled. In lending, specifically, the term means unpaid, as in a debt balance. 
   
Overadvance An overadvance is the funding of debt that will be used by a company to build its inventory prior to a high sales season (such as the winter holidays). Since the debt is taken prior to the expected spike in sales, the loan amount will temporarily exceed the company's accounts receivables balance. 
   
Overcontribution Overcontribution describes the deposit of funds into a tax-advantaged retirement account that exceeds the annual contribution limit as defined by the taxing authority. Overcontribution can sometimes result in monetary penalties. 
   
Overdraft Overdraft occurs when drafts or withdrawals exceed an account's available balance of funds. The term is used interchangeably with "insufficient funds." Overdraft can also mean an immediate credit extension, such as when there are insufficient funds in an account and the bank must extend credit to cover pending drafts. 
   
Overdraft annual cost Overdraft annual cost is the charge that a customer pays for having access to instant credit when a check written on an account exceeds the funds available in the account. If the bank pays the check, the accountholder is essentially borrowing money temporarily. This immediate credit access is an extra service for which most banks charge an annual fee. 
   
Overdraft minimum amount Overdraft minimum amount is the smallest value that a banking institution will transfer into an account when the available balance isn't sufficient to cover requested withdrawals. An account may, for example, have an overdraft minimum of $25. If the account balance is $100, and a check in the amount of $110 is presented for payment, the bank will advance the accountholder $25, rather than just the $10 overage. 
   
Overdraft protection Overdraft protection is a service offered on checking accounts. When a customer has it, the banking institution will pay presented checks, even if the funds available in the account aren't sufficient to cover the check amount. There's usually a fee associated with overdraft protection, as well as a per-check fee, when an overdraft situation occurs. 
   
Overlay Overlay is a comprehensive asset management style that has the goal of eliminating inefficient exposures that can occur when an investor has more separately managed accounts. The overlay system looks at the investor's holdings holistically, across all accounts, to identify overexposures and inefficient transactions. 
   
Overlying mortgage An overlying mortgage is a second mortgage, characterized by having a subordinate claim to the first mortgage on the same piece of real estate property. 
   
Over-the-limit fee Over-the-limit fee is an assessment charged by a credit card company when a credit card holder exceeds his approved credit limit.
   
Owe To owe is to have an obligation to pay or repay. 
   
Owner financing Purchase of property where the finance is provided in whole or part by the seller.
   
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Package mortgage A package mortgage is a loan secured by real estate property that finances the real estate and related personal property, such as furniture. 
   
Paid Paid describes a debt obligation that's been fulfilled. 
   
Paid up Paid up describes a debt or obligation that's current. In other words, all payments due have been made. The term can be used in reference to debts, credit accounts or brokerage accounts, such as when the customer must deposit funds to pay for a securities purchase. 
   
Parallel loan A parallel loan is a loan swap transaction, where two companies operating in different countries agree to lend each other money in their respective currencies. The purpose of the arrangement is to reduce the risk of financial loss related to foreign currency fluctuations. 
   
Paraplanning Paraplanning is the name for the administrative functions associated with financial management and planning. These functions might include preparing reports and completing paperwork. A paraplanner is one who performs these duties, much as a paralegal performs administrative tasks for attorneys. 
   
Parking Parking is the action of placing cash into a safe but high-yield investment until it's needed for another purpose, such as securities purchases. Parking can also refer to the illegal transfer of shares by a brokerage for the purposes of concealing undeclared short positions created when stocks were not delivered by the settlement date. 
   
Partial release Partial release is a mortgage feature that allows some of the collateral to be removed from the collateral pool under certain conditions. 
   
Partially amortized loan Partially amortized loan is a debt instrument that's structured with periodic principal payments plus a balance due at maturity. For comparison purposes, if the periodic principal payments were to result in a zero balance at maturity, the loan would be called a fully amortizing loan. 
   
Participation Participation is the act of sharing ownership in a debt facility. Lenders often split up ownership of loans with other lenders, particularly on large debt facilities, to reduce exposure. 
   
Participation certificate Participation certificate is a share of lease revenues generated from an agreement made by a municipality. The municipality pursues this arrangement in lieu of offering a bond issue that's supported by lease revenues, usually to avoid restrictions on debt levels. Freddie Mac, Fannie Mae, Ginnie Mae, and Sallie Mae issue and guarantee participation certificates. 
   
Participation loan A participation loan is a debt facility that's made by a group of lenders. Lenders often split up ownership of loans with other lenders, particularly on large debt facilities, to reduce exposure. 
   
Passbook savings account Passbook savings account is a cash deposit arrangement with no check-writing capabilities. If covered by FDIC insurance, this type of account is considered very safe, but the yields are generally low. 
   
Passive activity Passive activity is an endeavor which doesn't require or receive an individual's material participation. Owning a property rental, for example, is a passive activity. The characterization of something as a passive activity has important tax consequences; losses resulting from passive activity can't be used to offset gains resulting from active activities.  
   
Passive loss Passive loss is negative income resulting from a passive activity. A passive activity is an endeavor which doesn't require or receive an individual's material participation, such as owning a property rental. From a tax perspective, passive losses resulting from passive activity can't be used to offset gains resulting from active activities. 
   
Pass-through certificate A pass-through certificate is an ownership share in a pool of conforming, federally-insured mortgage loans. As payments are made on the underlying loans, they're forwarded from the lender to the issuing agency to the certificate holders. Pass-through certificates are issued by Ginnie Mae. 
   
Pass-through rate Pass-through rate is the yield paid to the investors of a mortgage-backed security. The pass-through rate is lower than the average interest rate paid on the underlying mortgages, because guarantee and management fees also must be paid out of the interest income generated by them. 
   
Pass-through security A pass-through security is an ownership share in a pool of income-producing assets, such as conforming, federally insured mortgage loans. As income is generated from the underlying loans, it's forwarded (i.e., passed through) from the lender to the issuing agency to the certificate holders. 
   
Past-due balance method Past-due balance method is a means of determining financing charges, where interest is calculated on amounts that aren't paid as of the due date. 
   
Pawnbroker A pawnbroker is a businessperson who makes small loans that are collateralized by personal property. If the loan isn't repaid, the property is sold in a retail store called a pawn shop. Jewelry, watches, and musical instruments are examples of items that would be accepted by a pawnbroker. 
   
Pay yourself first "Pay yourself first" is a phrase referencing the personal finance strategy of saving first before paying for anything else. To implement the "pay yourself first" strategy, individuals route a designated amount of each paycheck into a savings plan as soon as the check is received. Developing this as a habit keeps the saver on track to meet future savings goals. 
   
Payable on death - POD Payable on death, or POD, is a banking arrangement that authorizes the bank or credit union to disperse the client's assets/deposits to a beneficiary immediately if the client passes away. 
   
Paydown Paydown, in reference to debt, is short for paying down. It's a payment made that reduces a debt balance. 
   
Paydown factor Paydown factor, in mortgage-backed securities (MBS), is the ratio of one month's worth of principal reduction divided by the original principal amount. Paydown factors are reported monthly by MBS issuers. 
   
Payment cap The top limit on the size of the monthly payment for an adjustable rate mortgage loan.
   
Payment saver loan See lease-like loan.
   
Payment schedule This is the guidelines set forth for determining when your payment is due and how much each monthly payment will be throughout the life of your loan.
   
Payment shock Payment shock refers to the effect that a sudden increase in a loan's minimum payment can have on a borrower. Many mortgage loan products are structured to have potentially large changes in the minimum payment amount. Examples include ARMs with low teaser rates, and interest-only loans that later convert to fully amortizing loans. From a lender's perspective, payment shock is a risk, because the sudden increase could result in borrower default. 
   
Payout phase Payout phase is the duration of time when an annuity contract makes regular, periodic income payments to the annuitant. Prior to the payout phase, the annuity is said to be in the contribution phase. Annuity payments are taxable income. 
   
Payroll card A payroll card is a plastic pay card, similar to a debit card, that's funded by wage income. Instead of passing out paychecks, the employer funds each employee's card electronically.  Employees can then access their funds at ATM machines. 
   
Payroll tax Payroll tax is the amount of funds withheld by an employer from an employee's paycheck, to cover federal, state, and local income taxes. Amounts withheld for specific types of taxes are usually itemized on the payroll stub. After the close of the tax year, the employee must fill out a tax return to determine if the payroll taxes withheld were enough to cover taxes owed. 
   
Payroll taxes Payroll taxes are amounts withheld by an employer from an employee's paycheck, to cover federal, state, and local income taxes. Amounts withheld for specific types of taxes are usually itemized on the payroll stub. After the close of the tax year, the employee must fill out a tax return to determine if the payroll taxes withheld were enough to cover taxes owed. 
   
PC banking PC banking is a service that provides individual and business customers with access to their banking records from a personal computer. 
   
Pell grant The largest federal grant program. These are awarded based on need and given to families whose incomes are less than 30,000 a year.
   
Penalty A penalty is a punishment incurred by the failure to follow a rule. In taxes, the IRS charges penalties to those who don't pay their taxes on time. In personal finance, credit card companies charge penalties to those who remit their payments late.
   
Penalty rate Penalty rate, in lending, is a higher interest rate that goes into effect in default situations. Credit card agreements, for example, state the penalty rate (or default rate) value, along with the conditions that would cause the penalty rate to be triggered. Penalty rates can be several percentage points higher than the regular rate. 
   
Pension fund A pension fund is a program initiated by an employer to manage monies set aside for employee retirement. Monies deposited into the fund are invested for growth, so that the asset pool can support pension payments made to employees once they retire. Contributions come from employers and employees, and the management of the funds is usually outsourced to a third party. 
   
Pension plan A pension plan is a program initiated by an employer to manage monies set aside for employee retirement. Monies deposited into the plan are invested for growth, so that the asset pool can support pension payments made to employees once they retire. Contributions come from employers and employees, and the management of the funds is usually outsourced to a third party.
   
Pension shortfall A pension shortfall occurs when a company's pension fund doesn't have sufficient funds to meet expected future payment obligations. This can happen in defined-benefit plans, which place the risk of investment returns on the company rather than  the employee. If investments underperform, the plan won't have the liquidity available to meet its defined-benefit obligations. In a pension shortfall situation, the company must make additional deposits into the fund. Pension deposits are an expense to the company.  
   
Per diem interest The amount of interest calculated per day.
   
Per item charge Per item charge is an assessment incurred by a banking customer who has exceeded the number of free transactions allowed for his account. If the account allows up to 25 transactions per month, the customer will have to pay the per item charge for every transaction after the 25th one. 
   
Per-diem interest Per-diem interest is one day's worth of interest on a debt. Since interest rates are based on a period of one year, per-diem interest is calculated by extrapolation. The total annual interest expense is calculated based on the rate, and then that figured is divided by 360 or 365 (for ordinary and exact interest, respectively) to calculate per-diem interest. Per-diem interest is used to calculate the first month's interest when a loan funds on a day other than the first of the month. 
   
Periodic cap A protective measure for consumers that limits the maximum amount the interest rate on an adjustable rate mortgage can change in a time interval, usually 6-12 months.
   
Periodic interest rate Periodic interest rate is a loan's rate of interest, converted to be applicable to a time period other than one year. Interest rates are normally based on one year, but sometimes it's useful to know the rate to be charged over one week, one month or one quarter. These are periodic rates, and they're determined by extrapolation. If the rate on a loan is 10 percent, the periodic rate used to calculate one quarter's interest is 2.5 percent. 
   
Periodic rate Periodic rate is a loan's rate of interest, converted to be applicable to a time period other than one year. Interest rates are normally based on one year, but sometimes it's useful to know the rate to be charged over one week, one month, or one quarter. These are periodic rates, and they're determined by extrapolation. If the rate on a loan is 10 percent, for example, the periodic rate used to calculate one quarter's interest is 2.5 percent. 
   
Periodic rate cap A periodic rate cap is a limitation on how much an interest rate can be adjusted from one period to the next. Periodic rate caps are important to holders of adjustable-rate mortgages (ARMs); higher caps increase the possibility that the loan payments will rise beyond affordability at one adjustment. 
   
Perkins loan These need-based loans are funded by both the government and the college. Benefits of these loans include no interest while the student is in college and a nine month grace period upon graduation.
   
Permanent life insurance Permanent life insurance is a category of life insurance programs that offers a death benefit plus a tax-advantaged retirement investment account. Growth of funds in the investment account usually doesn't incur income tax liabilities. Permanent life insurance is considered an open-ended policy, in that the policy remains in force indefinitely and doesn't have to be renewed. 
   
Permanent loan A long term mortgage ranging anywhere from 10 to 30 years. Sometimes called an end loan.
   
Personal Equity Plan - PEP Personal equity plan, or PEP, is a type of investment plan that used to be available to U.K. citizens. PEPs encouraged investments by offering tax-free income and capital gains. PEPs were discontinued in the 1990s and replaced with Individual Savings Accounts. 
   
Personal finance Personal finance is a general term that refers to the strategies and practices of managing an individual's or household's money. Personal finance encompasses saving, budgeting, investing, etc. 
   
Personal finance manager A personal finance manager is a software program that helps individuals and households manage their money. Personal finance managers may have account registers, as well as budgeting and investment tools. Many also allow for data sharing with major banking and investment institutions. 
   
Personal guarantee A personal guarantee is an individual's agreement with a lender to repay the debts of a business. Loans made to start-up businesses require personal guarantees. As businesses become more established, the personal guarantee requirement will become a point of negotiation between the corporate officers and the lender. 
   
Personal identification number A personal identification number, or PIN, is a confidential password needed to access personal banking information at ATM machines, and to conduct purchase transactions using a debit card. 
   
Personal income Personal income is the total of an individual's gross earned, investment and passive business income. 
   
Personal injury protection Personal injury protection, or PIP, is an optional set of benefits available on an auto insurance policy. PIP pays medical expenses resulting from an auto accident. 
   
Personal interest Personal interest is interest charged on personal loans and credit card accounts. Personal interest is not tax-deductible. 
   
Personal loan Money borrowed from a lender where property is not used as collateral. The rates are higher, like credit cards, and are generally smaller denominations over a two year period.
   
Personal property Personal property, also known as chattel, is any owned property that isn't permanently attached to one location. Any property other than real estate is usually regarded as personal property. Most lenders will not place liens on personal property, because the risk is much higher that the borrower can flee and take the property with him. 
   
Personal property liability Personal property liability is a type of automobile insurance coverage that pays for damages to another party's car or property when you're at fault. 
   
Personal property taxes Personal property taxes are assessments charged to owners of certain types of movable property (property other than real estate). Most commonly, personal property taxes are assessed by states and local governments on things like cars, motorcycles, boats, recreational vehicles, airplanes, campers, etc.
   
Personal use property Personal use property is chattel that's owned for personal enjoyment rather than business or investment purposes. The distinction is important because losses associated with personal use property may not be tax-deductible.
   
Philanthropy Philanthropy is the practice of supporting the well-being of the human race. It's usually associated with giving donations to charitable organizations that pursue humanitarian objectives. 
   
Phishing Phishing is a scam that's designed to lure consumers into voluntarily providing confidential information. The consumer will receive an email that appears to be from a bank or online service provider (such as PayPal). The email will explain that the consumer needs to update account information or remedy an account problem. A link will be provided where the consumer can sign on and perform the requested tasks. The link directs the consumer to a phony website, where the confidential information provided by the consumer is recorded. 
   
Pick-up tax Pick-up tax is a state-imposed assessment that's based on the federal estate tax. Pick-up taxes are used by states that don't have their own estate tax legislation; rather than developing separate legislation, these states collect estate taxes by "picking up" an amount derived from the estate's federal tax liability.
   
Piggyback loan A piggyback loan is a second mortgage that's taken out to avoid mortgage insurance. Mortgage insurance is typically required on mortgages that finance more than 80 percent of the home's purchase price. A homebuyer who doesn't have a 20 percent cash down payment can fund a first mortgage for 80 percent and use a piggyback loan to cover the remainder of the purchase price.  
   
Piggyback mortgage A type of second mortgage typically used to avoid paying for mortgage insurance, which is required on mortgages with less than 20 percent down.  The borrower takes out a primary mortgage for 80 percent of the purchase price and then a second "piggyback" mortgage to cover all or part of the down payment.
   
PIN An Acronym for Personal Identification Number. This number is used to access bank accounts at ATM's or sometimes online and should be kept a secret.
   
PIP PIP, also called personal injury protection, is an optional coverage available on auto insurance policies that pays the medical expenses incurred by you and your passengers that result from a qualified accident. 
   
PITI These are the four components of the monthly payments to the lender, i.e. the principle, interest, taxes and insurance. Debt to income ratio is calculated by the lender from this amount. Sometimes mortgage insurance is also included in an impounded loan. 
   
PITI reserves An amount of cash that a homebuyer must have on hand after all of the closing costs and down payments have been made. This amount is generally equal to a specified amount of mortgage payments including principal, taxes, and insurance.
   
Planned unit development (PUD) A type of ownership where a unit or the whole building is owned by an individual who lives in it and where the ownership of common spaces is shared by other members of the homeowner's association for the benefit of all owners. 
   
Planned urban development - PUD Planned urban development, or PUD, is a zoning class that allows for residential and commercial buildings. The PUD classification allows builders to develop residential, retail, and professional buildings into one community, so that residents can live, work, and play locally. 
   
Plat A map showing the way a parcel of land has been divided into individual lots. This map will also show the streets and easements.
   
Pledged asset Pledged asset is property that secures debt and remains in possession of the lender until the debt requirements have been met. While the asset owner/borrower has to transfer the pledged asset to the lender, the lender has no ownership rights to the pledged asset unless the borrower defaults. 
   
Pledging Pledging is the process of providing assets to a lender for use as loan collateral. Pledged assets are held by the lender until all debt conditions have been met, but the lender doesn't own those assets unless the borrower defaults. 
   
PLUS loan Loans that are not need based that the parents of the student may take out. These loans are offered by the college and the government and are determined by the FAFSA.
   
PMI PMI, or private mortgage insurance, is coverage that protects the lender from costs associated with foreclosing on a mortgage loan. Lenders require PMI coverage when the mortgage loan finances more than 80 percent of the property's value. PMI premiums are paid by the borrower. 
   
Point Point is short for percentage point. In bonds, the term is used in reference to changes in interest rates; a rate that changes from 8 percent to 9 percent is said to have moved up 1 point. In real estate lending, a point is an upfront fee equal to 1 percent of the loan amount. Point can also refer to value changes in stocks and stock indices, even though these aren't percentage figures. For example, if the Dow Jones Industrial Average rises from 12,200 to 12,325, it is said to have increased 125 points. 
   
Point-of-sale Point-of-sale is the location, physical or virtual, where sales are made. In a retail store, the point-of-sale is the cash register area where consumers pay for goods. For an Internet retailer, the point-of-sale is the interface that accepts the consumer's payment information. 
   
Point-of-service plan Point-of-service plan, also called POS, is a type of healthcare coverage that allows insureds to choose in-plan care (like an HMO) or out-of-plan care (like a PPO). Insureds can save on out-of-pocket costs by using in-plan care providers, but they still have the option to choose the provider they want to see. 
   
Points One point equals one percent of a mortgage. There are origination points and discount points. Origination points help cover the loan expenses for the lender and discount points help borrowers by reducing interest rates.
   
Points (time share) Points (time share) are credits that can be used in exchange for use rights at properties within a time share network. Time share properties that use the points system assign a certain number of points to an owner's use rights, based on the length and frequency of the stay. If the owner wishes to stay at another property in the network, he can trade in his points at his home property and receive a stay of an equivalent point value at the other property. 
   
Points-based vacation plans Points-based vacation plans are time share ownership arrangements, where use rights are given a point value based on length of the stay and size of the unit, etc. Properties form networks so that points can be used at any resort within the network. 
   
Policy (insurance) Policy (insurance) is the documentation that explains the rights and obligations of an insured and insurance provider. Specifically, the policy will state coverages, exclusions, and premiums. 
   
Policy loan A policy loan is a debt secured by the cash value of a life insurance policy. If the borrower doesn't pay back the debt, the policy death benefit can be reduced by the unpaid amount. 
   
Pool factor Pool factor is a reported figure that represents the percentage of principal still outstanding in a mortgage-backed security issued by either Freddie Mac, Fannie Mae, or Ginnie Mae. As principal payments are received on the underlying mortgages, they're passed through to investors. At any given time, the pool factor represents the mortgage principal that hasn't yet been repaid. 
   
Pooled income fund Pooled income fund is a mutual fund that invests financial gifts and distributes the income to fund participants and beneficiaries. The participants are the donors and the beneficiaries are the gift recipients. A pooled income fund provides tax advantages to the participant in the year the fund is created. The fund is structured to make income payments to the participant until death. After the participant's death, ownership of the assets are transferred to the beneficiary. 
   
Pop-up option Pop-up option is an optional feature on a pension plan that allows the retiree to continue receiving the full pension amount if the spouse dies before the retiree. Without the pop-up option, the retiree would receive a lesser, "survivor" amount once the spouse passes.  
   
Portability Portability is the quality of being movable; in reference to employee benefit plans, portability is the ability of benefit plans to stay with the employee through a job change. The Consolidated Omnibus Budget Reconciliation Act, or COBRA, for example, allows employees to stay on their former employer's health plan for up to 18 months. 
   
Portfolio lender A portfolio lender is a financial institution that makes loans and keeps them in-house until they're paid off, rather than selling them to investors on the secondary market. The portfolio lender typically offers deposit services as well, and uses the deposits as a source of liquidity. Profits are generated by charging more on loans than paying out on deposits. 
   
Portfolio runoff Portfolio runoff is the reduction of outstanding mortgage principal (due to prepayments) within a mortgage-back security (MBS) portfolio. If interest rates change significantly, homeowners are inclined to refinance at the lower market rates. When they do, the MBS portfolio and its expected income over time are both reduced. 
   
POS POS, or point-of-sale, is the location where retail sales are transacted. In a retail location, this is the area near the cash registers. In an Internet store, the POS is the interface that accepts the consumer's payment information. 
   
Positive carry Positive carry describes a situation where two related cash flow positions net out to a positive number, thus creating a profit. A simple example would be borrowing money at 8 percent, and investing it to return 10 percent. The 2 percent difference is your profit. 
   
Positive yield curve Positive yield curve describes the economic environment in which, for two comparable interest-bearing investments, long-term yields are higher than short-term yields. This situation indicates that interest rates are expected to go up in the future. 
   
Possession When all of the paperwork is complete and the closing arrangements are finalized, the owner is given keys to the house.
   
Postnuptial agreement A postnuptial agreement is a legal arrangement between a husband and wife that specifies how their property is to be distributed in a death or divorce. Normally, both husband and wife must retain separate legal representation.  
   
Pour-over will A pour-over will is a legal document that expresses an individual's desire to have all of his assets placed in a pre-existing trust upon his death. The trust itself is the primary vehicle for distribution of the estate's assets, but the pour-over will provides an added mechanism for directing the asset distribution. 
   
Power of attorney A legal document that authorizes one person to act on behalf of another. There can be a General POA granting compete authority or a specific POA for a specific act or for a certain period of time. 
   
PPO A PPO is a type of healthcare coverage that combines the characteristics of fee-for-service and HMO plans. The insured has the option to choose healthcare providers, but receives more expansive coverage when visiting providers are approved by the plan. 
   
Pre-admission authorization Pre-admission authorization is permission to begin an in-patient stay or procedure, provided to an insured by an insurance provider. In some healthcare policies, the insured must receive pre-admission authorization or coverage won't be provided. 
   
Pre-approval This term denotes that the borrower gets his home loan application with debt, income and savings proof reviewed and approved by an underwriter before finalizing any property. The pre-approval is done taking into account certain loan amount and estimating the interest rates and property taxes, insurance etc. at the time of taking the loan. It applies only to the borrowe, but once the property is chosen, it should also meet the underwriting guidelines of the lender. 
   
Pre-approval letter The official letter stating how much money a borrower is qualified for based on interest rates and credit history.
   
Preapproval letter (mortgage) A preapproval letter (mortgage) is a document produced by a mortgage lender or broker that provides an estimate of how much an individual would be able to borrow in the current interest rate environment. A preapproval letter can be submitted with an offer to make the seller feel more comfortable about the buyer's prospect of obtaining financing. 
   
Pre-approved Pre-approved describes credit card offers that result from cursory credit screenings. An individual who receives a pre-approved offer isn't guaranteed to receive the credit card account. If, for example, the individual states his income as zero, the card application is likely to be declined, regardless of the pre-approved status. 
   
Pre-computed loan A pre-computed loan is a type of auto loan facility. It's structured with a standard amortization table, such that the total interest is determined before the loan is funded. This total interest is added to the loan amount, and your payments are applied to the combined balance. When a borrower agrees to a pre-computed loan, he's agreeing to pay back the total interest and principal, even if the loan is paid off early. 
   
Predatory lending Predatory lending describes the practice of dishonest or unethical conduct by loan brokers and lenders for the purposes of persuading borrowers to take inappropriate, over-priced loans. The federal government and some state governments have laws prohibiting predatory lending. 
   
Pre-existing condition A pre-existing condition is known health ailment that came into being before the execution of an insurance contract. The insurance provider will usually exclude coverage related to the pre-existing condition, either temporarily or permanently. 
   
Preferred debt Preferred debt is an amount owed that has repayment priority over another debt. In reference to mortgages, for example, a first mortgage has a higher lien position than a second mortgage. Of the two loans, therefore, the first mortgage is the preferred debt. 
   
Preferred provider organization A preferred provider organization, or PPO, is a type of healthcare coverage that allows the insured to select from lower-cost, network providers and higher-cost, out-of-network providers. Coverage applied to in-network healthcare is generally more expansive and costs less than coverage applied to out-of-network care. 
   
Preforeclosure sale Preforeclosure sale is a property sale that takes place in lieu of foreclosure, where the money raised by the sale is used to pay off the debt. In many cases, the funds raised are less than the amount owed and the lender must write-off the difference. Preforeclosure sales can only proceed with approval from both the borrower and the lender. 
   
Pre-foreclosure sale When the borrower sells the property for less that what is owed on the loan to avoid foreclosure. This sale will fulfill the borrower's debt.
   
Premature distribution A premature distribution is a taxable, penalized withdrawal made from a tax-advantaged retirement plan. An example of a premature distribution is the removal of funds from an IRA before the accountholder reaches the age of 59 1/2. This type of withdrawal is subject to a 10 percent penalty.
   
Premium A premium is the cost of an insurance policy. Premium can also mean the amount paid for something over and above its stated value. A concert-goer, for example, would probably pay a premium for front row seats. 
   
Prenuptial agreement A prenuptial agreement a legal arrangement between a man and woman who intend to marry. The agreement specifies how their property is to be distributed in the event of divorce. The prenuptial agreement can also outline each person's rights and responsibilities while the marriage is in force. 
   
Prepaid expenses or prepaid items or prepaids Prepaid expenses, prepaid items or prepaids are business balance sheet assets that are created when goods and services are paid for in advance. Consider, for example, a business that pays its insurance premiums in December for policies that are in force for the following calendar year. Rather than account for this transaction as an expense in December, the premium amount is held in a balance sheet account (called prepaid expenses). and expensed periodically throughout the following year. Doing so matches the expense with the timing of the benefit received. 
   
Prepaid interest As a way to save on taxes, a borrower can pay interest before it is due.
   
Prepaid tuition plans An option that lets potential and future parents pay for a semester of college today which will lock in the current interest rate for the future educations regardless of the year and tuition increases.
   
Preparation charges An additional way for a car dealer to make money by convincing the buyer that they need to pay for prep charges which have already been paid by the manufacturer in order to get the car ready for sale.
   
Prepayment A full or partial payment of the principal amount of the loan before due date. 
   
Prepayment penalty A penalty or fee charged for payment of the loan amount before the due date. 
   
Prepayment plan A prepayment plan is a mortgage payment plan that's managed by a third party. The mortgage borrower makes biweekly payments to the third party, which then funds the borrower's required monthly payment. After one year, the borrower will have made 26 half-payments, which amounts to 13 total payments to the third party. Over the same time period, the mortgage lender will only require 12 payments due. The third party sends the lender the additional amount as an extra principal payment. Over time, this dramatically reduces the mortgage interest costs, and shortens the length of the loan.
   
Prepayment privilege Prepayment privilege is a debt option that allows the borrower to pay off the debt before maturity.  
   
Prepayment risk Prepayment risk is the risk of suffering lost income on a fixed-income security due to early payoff of the outstanding debt. On a mortgage-backed security (MBS), for example, the underlying mortgage borrowers may refinance their mortgages if markets rates go down significantly. When this happens, the income-producing asset pool of mortgage loans is reduced; investors, therefore, ultimately receive a lower yield on their investment. Some securities are structured with protections against prepayment risk.  
   
Prepayment speed Prepayment speed is an estimate for how quickly mortgage borrowers in a securitized pool of mortgage loans will refinance or repay their mortgages. Prepayment speed is an indication of prepayment risk associated with a particular issue of mortgage-backed securities (MBS). Investors look at prepayment speed when judging the value of a particular MBS investment. 
   
Prequalification Prequalification is the process of estimating how much a prospective homebuyer can borrow based on current interest rates and the borrower's stated income. Prequalification doesn't represent a binding loan approval.
   
Pre-qualification Information given to the loan officer about the borrowers position on his debt, income and savings before granting of a loan. The loan officer may or may not ask for the borrower's credit report. 
   
Pre-sold home A home which is sold before it is built.
   
Previous balance Previous balance, in an open-ended credit arrangement, is the amount of revolving debt outstanding at the beginning of a billing cycle. Some credit agreements calculate interest on the previous balance amount, which results in higher interest costs to the borrower. 
   
Previous balance method Previous balance method is a means of calculating interest charges on a revolving credit account, such as a credit card. The interest rate is applied to the entire amount outstanding at the start of the billing cycle, regardless of whether any of this balance was paid down during the billing cycle. The previous balance method usually results in higher interest charges than other methods. 
   
Primary care network Primary care network is a group of healthcare professionals who provide healthcare services to a defined set of insured individuals. These providers are the first point of contact when an insured is in need of healthcare services. The insurance plan creates and defines the primary care network.
   
Primary mortgage market The primary mortgage market is the industry that originates mortgage loans, inclusive of mortgage lenders, brokers, and borrowers. The primary functions associated with originating mortgage loans are differentiated from the activities in the secondary mortgage market, where funded mortgage loans are bought and sold as investments.  
   
Prime Prime describes the best-qualified borrower, as in: "Only prime borrowers will qualify for this low rate." The term is related to the prime rate, which is a base lending rate reserved for the most creditworthy borrowers.   
   
Prime accounts Prime accounts are accounts receivable that are high enough quality to be included as collateral for a business loan. The loan agreement will provide an exact definition of prime accounts, but generally, they have to be current and held by creditworthy customers. Prime accounts are also called eligible accounts. 
   
Prime bank Prime bank, in proper usage, describes a large, reputable international bank. In more common usage, however, the term is used by con artists when scamming investors out of money. The SEC has published warnings to consumers and investors to be cautious about dealing with anyone who describes high yield investment programs backed by a prime bank. Often, these investment programs are fictitious, and the investors lose their money. 
   
Prime conforming Prime conforming describes a mortgage loan made to a well-qualified borrower in an amount that's within the conforming limits set by the Office of Federal Housing Enterprise Oversight (OFHEO). Prime refers to the borrower's creditworthiness; conforming refers to the conservative loan size and structure, which makes the loan eligible for resale to, or guarantee by, Fannie Mae and Freddie Mac.  
   
Prime for life Prime for life is a line of credit whose interest rate is the prime rate with no margin. Since the prime rate is a variable value, a prime for life loan is a variable-rate instrument. Only the most creditworthy borrowers normally qualify for a prime for life debt. 
   
Prime rate The interest rate that a bank charges its most reliable customers who are the least likely to default on their loan.
   
Principal The actual value of a mortgage or note borrowed or the balance left of a loan not taking into account any interest.
   
Principal amount Principal amount is the loan amount at funding, and the amount that has to be repaid when the loan matures, excluding interest and debt charges. 
   
Principal balance Principal balance is the amount owed on a debt. At funding, the principal balance is the loan amount. If payments have been made on the debt, the principal balance is the remaining, unpaid amount. 
   
Principal residence Principal residence is the place where one lives most of the time. The distinction between a principal residence and secondary property is important when determining tax liability on any gains earned by selling the property. 
   
Principal risk Principal risk is the danger of losing invested funds due to bankruptcy or default. Before an investor buys an equity share in a company, for example, she must assess the probability that the company will become insolvent and be unable to return her investment. 
   
Principal, interest, taxes, insurance - PITI Principal, interest, taxes, insurance, or PITI, are the different parts of a complete mortgage payment. Principal is the amount applied to the debt balance, interest is the monthly accrued financing charges, taxes are pro-rated amounts applied to the annual tax bill, and insurance is the mortgage insurance premium. 
   
Principle of conformity The idea that a house will garner a fair price if it is located near houses of similar size and condition.
   
Principle of progression When a piece of real estate which is of lower value can command a higher price due to its location and proximity to higher end properties.
   
Principle of regression The opposite of progression. When a high end property's value is brought down by its location and proximity to lower end properties.
   
Prior redemption privilege Prior redemption privilege is synonymous with prepayment privilege; it's a borrower's contractual right to pay off debt early without penalty. A borrower would choose to do so if interest rates drop such that refinancing the debt would result in lower interest charges. 
   
Prioritization of debt Prioritization of debt is the placement of amounts owed in primary, secondary, and tertiary positions. Primary debt is the first to be repaid if the borrower becomes insolvent and must liquidate assets to pay off creditors. 
   
Private annuity Private annuity is an annuity contract made between two parties, neither of which is an insurance company in the business of selling annuities. An annuity is an arrangement whereby one party pays a fee, or transfers assets to another party in exchange for a guaranteed stream of income payments. There may be certain tax benefits associated with setting up a private annuity as a means of transferring assets to a family member. 
   
Private banking Private banking refers to the expanded set of services financial institutions offer to their wealthy customers. These services might include financial and estate planning, investment management, etc. Customers must meet minimum deposit requirements to have access to private banking services. 
   
Private college/university A private college/university is an institution of higher learning that doesn't receive public funds. These colleges and universities are usually characterized by higher tuition rates, smaller classes and, sometimes, more specialized programs. 
   
Private debt Private debt is an economic term referring to the total money owed by individuals and businesses within a country. 
   
Private investment fund A private investment fund is a company that issues securities to an exclusive group of investors, and is exempt from certain SEC regulations. To be considered an exempt, private investment fund, the entity must have fewer than 100 investors, or its investors must have large amounts of money invested in other places. The exemption from SEC regulation provides private investment funds with an added level of flexibility in pursuing specialized investments. 
   
Private label cards Private label cards are credit accounts issued by retailers. Department stores commonly offer private label cards, which can only be used at that store. They're called private label because the retailer partners with a card issuer to have the capability of offering a credit card that carries the retailer's brand name and logo. 
   
Private mortgage insurance (PMI) It serves to protect lenders against defaults or losses from borrowers. Borrowers are required to carry Private Mortgage Insurance if their loan has loan-to-value higher than 80 percent. Depending on the type of loan the borrower will have to pay an initial premium and a monthly premium.
   
Probate Probate is the process of establishing a will's legal validity. 
   
Probate sale Upon the death of the owner, the sale of the property as supervised by the court. The proceeds are divided upon the heirs and creditors.
   
Proceeds Proceeds are monies which result from transactions. In real estate, for example, the proceeds from a property sale are the funds generated by that sale. In lending, the proceeds of a loan are the monies funded by the loan. 
   
Production home Homes that are mass produced by one builder or developer.
   
Profile A profile, in general, is a summary of data, such as the set of information kept on file for customers, vendors, students, employees, etc.
   
Progressive tax Progressive tax is an assessment that's charged at a higher rate to higher-income individuals. Income taxes are usually progressive. 
   
Projected maturity date Projected maturity date is an estimate of the date on which an obligation will be fulfilled. In collateralized mortgage obligations (CMOs), the projected maturity date is the date the final payment is expected to be made. 
   
Promissory note A written agreement to repay a loan.
   
Proof of claim A proof of claim is a written filing made by a creditor during bankruptcy proceedings, which describes the nature of the debtor's obligation to the creditor. 
   
Property Property is something owned. There are several types of property, such as personal, real estate, and intangible. Personal property includes movable objects, such as boats, cars, clothes and jewelry. Real estate property is land. Intangible property includes patents and trademarks. 
   
Property report A property report is a compilation of data on undeveloped land that's filed with the U.S. Housing and Urban Development's Office of Interstate Land Sales Registration. 
   
Property tax A tax assessed by the state or local government on real estate and personal property whose amount varies depending on the property's value and the various services provided to the property. Property taxes are most often paid into an escrow account and the lender is responsible for paying the taxes when it is due.
   
Property tax deduction An expense on a home loan that the federal government allows homeowners to deduct from their income before computing their income tax
   
Property value How much a piece of real estate is worth based on the price a buyer and seller would negotiate.
   
Proportional tax Proportional tax is an assessment system that calculates taxes at the same rate for all individuals within the tax jurisdiction. The U.S. and Canada do not use proportional taxes. 
   
Proprietary lease A proprietary lease is a property use arrangement provided by a corporation to a co-op owner. When an individual buys into a co-op building, the ownership arrangement gives the owner a certain number of shares in the co-op, along with a proprietary lease for one of the residences in the building. 
   
Prorate An agreement on how the property taxes are paid and handled depending on when the title changed hands.
   
Prudent-Person Rule The Prudent-Person Rule is a legal concept that seeks to protect investors from advisors who employ risky investment strategies on behalf of their customers. Investment advisors are required to act with discretion and limit investment choices to securities that a reasonable or prudent person would buy for her own portfolio. 
   
Public college/university Public college/university is an institution of higher learning that's partially funded by the state. Public colleges and universities generally have much lower tuition rates, and are therefore more accessible to the general population. 
   
Public record Public record is a general term for legal documentation or property ownership information that's kept available for public review. Court records and certain documents pertaining to real estate transactions are often part of the public record. 
   
Public Securities Association Standard Prepayment Model - PSA Public Securities Association Standard Prepayment Model, or PSA, is a method of quantifying and planning for prepayment risk associated with a pool of mortgage loans backing a security issue. The model assumes that the rate of prepayments will gradually rise over the life of the mortgage loans. 
   
Punch list A punch list is an account of items that need to be addressed. In construction projects, punch lists are used to document unfinished items or items that need repair. Punch lists can also be used to document repairs that need to be made before a property sale is finalized. 
   
Punitive rate Punitive rate is a high interest rate charged by credit card issuers to accounts that are in bad standing. Punitive rate may also be called default rate, and may result from missed payments, or charges that are in excess of the credit line. 
   
Purchase agreement A contract in which the buyer and seller approve the price and other terms of the transfer of title. This contract is required when you apply for the loan. Also called an agreement of sale, a purchase contract or a sale contract.
   
Purchase contract See Purchase agreement.
   
Purchase mortgage market The purchase mortgage market is the portion of the mortgage origination industry that deals with home purchases, and doesn't include refinance mortgages. 
   
Purchase option A real estate agreement under which a portion of monthly rent may be used toward eventual purchase of the property. For automobiles, the portion of a lease agreement that establishes the amount the lease holder can pay in order to purchase the car when the lease terms are complete. The price is usually the residual value.
   
Purchase-money mortgage A home loan that a borrower obtains to buy property and uses the property as collateral for the loan.
   
Pure lease Pure lease, also called a true lease, is an arrangement between a lessor and lessee that doesn't allow the lessee with the option to purchase the leased property or renew the lease term. Pure leases are usually used for short-term equipment financing. 
   
Purpose loan A purpose loan is a debt instrument that's collateralized by security holdings and used to finance the purchase of additional security positions. Purpose loans are subject to Federal Reserve Board restrictions and margin requirements.
   
Q Back to top
Qualified adoption expenses Qualified adoption expenses are costs associated with adopting a child for which the IRS provides a tax credit. Qualified expenses include things like attorney fees and adoption agency fees. Fees incurred while adopting a spouse's child do not qualify for the tax credit. 
   
Qualified disclaimer Qualified disclaimer, in the U.S., is a legal refusal to accept an ownership interest in property, usually for the purposes of avoiding an estate tax liability. Qualified disclaimers are governed by restrictions and requirements as set forth in the IRS Tax Reform Act of 1976. 
   
Qualified dividend A qualified dividend is a profit distribution to shareholders that can be taxed as a capital gain. This tax treatment is advantageous to the taxpayer since tax rates on capital gains are usually lower than income tax rates. 
   
Qualified Medicare Beneficiary Qualified Medicare Beneficiary, or QMB, is a program that covers certain Medicare deductibles including the Part A hospital deductible and the annual Part B deductible. The QMB program was established by the Medicare Catastrophic Coverage Act of 1988. 
   
Qualified retirement plan A qualified retirement plan, in the U.S., is an employer-established retirement savings program that meets IRS requirements, and therefore receives certain tax advantages. Pension programs, profit-sharing plans, and 401(k)s are qualified retirement plans. 
   
Qualified Terminable Interest Property (QTIP) Trust Qualified Terminable Interest Property Trust, also called a QTIP trust, is an estate planning tool that allows assets to be transferred from one spouse (the trust grantor) to another. Assets are transferred into the trust, and income from those assets can be directed to the spouse. If the trust grantor dies first, this arrangement makes the trust assets inaccessible to anyone else, should the surviving spouse remarry. 
   
Qualified tuition plans (QTP) These plans are known as 529 plans and include both prepaid tuition plans and college savings plans.
   
Qualifying investment A qualifying investment is an investment that can be made with pretax money because it fulfills stated requirements of the taxing authority. Examples include funds invested in qualified retirement plans and college savings plans. 
   
Qualifying ratios This is a ratio of all fixed monthly expenses including PITI and other costs like students' loans, credit card payments and car loans to the total monthly income. This is calculated to determine the borrowers capacity. 
   
Qualifying widow/er Qualifying widow/er is a tax filing status that can be used by an individual for two years following the death of a spouse. Qualifying widow/er status allows the surviving spouse to be taxed with the rates that apply to those who are married, filing jointly. To qualify for this status, the individual must not be remarried, and must have a dependent child living in the home. 
   
Quick assets Quick assets are items of value that can be easily converted to cash. These include short-term investments and accounts receivable. 
   
Quick ratio Quick ratio is the quotient of cash plus accounts receivable, divided by current liabilities. The ratio, also called the acid-test ratio, is used to assess a company's ability to meet its short-term obligations. A higher quick ratio means the company is more capable of meeting upcoming payment obligations with cash and accounts receivable. 
   
Quitclaim deed The document that transfers the ownership of a title to property and is filed with the government. It often is used among family members and can be used to clear up a gap in the chain of title or inheritance questions.
   
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Rabbi Trust A Rabbi trust, also called a grantor trust, is a legal entity created by an employer to provide for non-qualified employee benefits. The name comes from the first IRS ruling on the subject, which involved a synagogue.
   
Radon gas Radon is a cancer-causing, radioactive gas that kills 21,000 Americans a year, according to the U.S. Environmental Protection Agency. Some states' real estate laws require a seller to inform potential buyers when it is present.
   
Rain check A rain check is the promise by a business to a customer that a sold out sale item can be purchased at some later date for the discounted price. A rain check can also be a ticket entitling a person to a replacement event, when the original event is rained out. 
   
RAL RAL stands for refund anticipation loan; it's a short-term loan offered to a taxpayer who's expecting a tax refund. The borrowed funds are repaid when the tax refund arrives. 
   
Rate The percentage of interest a borrower pays for the use of money.
   
Rate after intro The interest rate that will apply to the line of credit after the promotional or introductory period is over.
   
Rate and term refinance Rate and term refinance is the restructure of a mortgage loan that involves changing the interest rate and maturity length of the loan. The loan amount doesn't change with a rate and term refinance. These mortgage loans are often less expensive than cash-out refinances, which are made in amounts larger than the original mortgages. 
   
Rate improvement mortgage A mortgage with a one time interest rate cut that allows a borrower to save money on his mortgage without paying a refinancing charge.
   
Rate index This index is used to determine the interest changes on an adjustable rate mortgages and variable rate loans. It is expressed in a table format and quotes the yields that are being paid on debts like Treasury Bills and bank deposits.
   
Rate lock A commitment guaranteed by a lender that an interest rate will not change on a quoted mortgage for a specific period of time.
   
Rate shopping Rate shopping is the process of applying for a loan with more than one lender, in an effort to find the most attractive terms. 
   
Rate-improvement Rate-improvement is a provision included in some fixed-rate mortgages; it allows the borrower to reduce the loan's interest rate one time during the loan's life. Without this provision, such a rate change would require a refinance. 
   
Rate-improvement mortgage Rate-improvement mortgage is a fixed-rate, real estate loan that includes a rate-improvement option. The rate-improvement provision allows the borrower to reduce the loan's interest rate one time during the loan's life. Without this provision, such a rate change would require a refinance. 
   
Rating A rating, in finance, is an assessment of the financial strength of a person, business, or debt issue. Credit ratings are used for people and businesses, stock ratings are used for equities, and bond ratings are used for commercial and municipal debt. 
   
Reaffirmation agreement An agreement by someone involved in a Chapter 7 bankruptcy to continue paying a debt after the bankruptcy. This is typically used to keep a car from being repossessed during bankruptcy.
   
Real asset A real asset is property that has value based on its utility. Land and equipment are real assets, but securities holdings are not. 
   
Real estate Real estate is land. Most of the time, the ownership of land includes ownership of the buildings and resources located on that land. 
   
Real estate agent A licensed person who negotiates a real estate transaction and represents either the buyer or the seller.
   
Real estate attorney A lawyer who specializes in real estate title transfers and property tax issues.
   
Real estate broker A broker is similar to an agent but often has agents working under them and takes a percentage of the agent's commission in exchange for office space and overhead. The broker will also represent a buyer or seller in a real estate sale.
   
Real estate bubble A rapid increase in the prices of homes followed by a steep drop off.
   
Real estate investment group A real estate investment group is an organization that purchases a portfolio of properties that are resold in shares to investors. The group manages the tenants and property maintenance in return for a percentage of rent proceeds. 
   
Real estate investment trust Referred to as a REIT. This trust invests primarily in real estate and passes the income and losses onto the investors.
   
Real Estate Investment Trust - REIT A Real Estate Investment Trust, or REIT, is an exchange-traded security that invests in real estate. REITs often specialize in certain types of real estate investments. For example, an Equity REIT owns rental properties and a Mortgage REIT purchases or funds mortgage loans. 
   
Real Estate Limited Partnership - RELP A Real Estate Limited Partnership, or RELP, is a business entity formed to profit from land holdings, either through development or capital appreciation. RELP partners participate directly in the business activities. 
   
Real Estate Mortgage Investment Conduits - REMIC Real Estate Mortgage Investment Conduits, or REMICs, are securities that are backed by segmented pools of mortgages. Each segmented pool supports a different class of security, each of which carries a different maturity and coupon. 
   
Real Estate Operating Company - REOC Real Estate Operating Company, or REOC, is an exchange-traded security that invests in real estate. REOCs are different from Real Estate Investment Trusts (REITs) because REOCs reinvest earnings back into the business, while REITs distribute all profits to investors. REOCs generally seek to provide investors with strong capital gains (rather than regular income).   
   
Real estate or real property Real estate or real property are both terms for land, inclusive of the buildings and natural resources on the land. 
   
Real estate owned Real estate owned is a lender's portfolio of properties that failed to sell at foreclosure auctions. Once the property fails to sell at the auction, the lender must try to sell it on the real estate market. Investors target these properties, because they typically sell at a discount. 
   
Real Estate Settlement Procedures Act Known as RESPA. A law protecting consumers from abuses and usury that requires lenders to give homebuyers advance notice of closing costs, settlement costs, relationships and lending practices.
   
Real estates Land, building or improvements on the property,
   
Real financing cost A rate that takes into account specific costs, fees, rate changes and the projected amount of time you will have the loan.
   
Real interest rate Real interest rate represents the rate earned by an investment, discounted for inflation. Say, for example, that an individual purchases a bond paying 6 percent interest, and the inflation rate is 5 percent. The real interest rate is 1 percent, or the portion of the rate that's in excess of the inflation rate.  
   
Real property Unmovable property, like buildings and land.
   
Realized gain Realized gain is the profit earned when an asset is sold for more than it cost to acquire. Realized gains usually have tax consequences. 
   
Realized loss A realized loss occurs when an asset is sold for less than it cost to acquire. Realized losses can be used to offset the taxes owed on realized gains. 
   
Realtist A Realtist is one who maintains membership in the National Association of Real Estate Brokers. 
   
Realtor A real estate agent is a realtor when he is a member of The National Association of Realtors. It is also a registered collective membership mark that identifies with a real estate professional who is a member of the NAR and follows a strict code of ethics. 
   
Reasonable and customary charges Reasonable and customary charges are standard fees charged by healthcare providers for a particular service or procedure. 
   
Reassessment A reassessment is a second evaluation. In property taxes, a reassessment is the process of updating the taxable value of a property or properties. 
   
Rebalancing Rebalancing is the process of re-allocating invested funds so that a portfolio follows an intended investment strategy. Periodic rebalancing is necessary because the allocation of funds will change as securities perform at different levels. For example, one security may experience a value increase of 25 percent, while the rest of the portfolio grows at an average of 8 percent. The investor will then have too much exposure in the out-performing security. Rebalancing will return the portfolio to the desired asset allocations. 
   
Rebate A rebate is a partial refund of a purchase transaction. More generally, a rebate can also be a discount, incentive, or kickback, such as the discount provided when a bill of exchange is fulfilled before maturity. In a bond short sale, the lender will sometimes pay a rebate of interest earned on the sale's proceeds to the seller. 
   
Rebate card A rebate card is a plastic card that holds transaction data so that the customer can accrue cash or merchant credit. Rebate cards are used to foster customer loyalty. 
   
Recast trigger Recast trigger is a predefined event that will reset payments on a negative-amortizing mortgage loan so that the mortgage converts to a fully amortizing structure. Mortgages that allow for negative amortization, such as Option ARMs, will have defined recast triggers. Usually, there'll be a recast trigger date and a recast trigger amount. If the loan balance rises to a certain level, the mortgage automatically converts to fully amortizing payments. Otherwise, the loan will convert at the recast trigger date. 
   
Receipt A receipt is the written documentation of a purchase transaction. 
   
Receiver A receiver is an individual assigned to manage a bankrupt company's assets, such that creditors can be paid back as much as possible. The receiver's role may be limited to selling off the company's assets, or it could involve managing company operations for a short period of time. 
   
Receivership Receivership is a stage of a business bankruptcy proceeding. The company is said to be in receivership when the court has assigned an individual to run the operations temporarily.  This individual is tasked with managing the assets so that creditors can be repaid as much as possible. 
   
Recession Recession is an economic state where overall production is stagnant or declining.  Generally, it's viewed as a fall in the Gross Domestic Product for two quarters in a row. 
   
Reciprocity Agreements between states that help reduce or eliminates non-resident fees at public universities to help lower costs for out-of-state residents.
   
Recognized gain or loss Recognized gain or loss is the profit earned, or deficit incurred, from the sale of an asset. When the asset is sold for more than its purchase price, the seller recognizes a gain. When the asset is sold for less than its purchase price, the seller recognizes a loss. Recognized gains are usually considered taxable income, but these gains can be offset by recognized losses. 
   
Reconditioning reserve Reconditioning reserve is a deposit paid by one who leases a car; the reserve amount is held by the lessor and used to offset any amounts owed at lease maturity. 
   
Reconveyance The official transfer of the property title after the mortgage has been paid in full.
   
Recorder A public or government official who keeps and maintains real-estate records.
   
Recording Recording is the entering of a document into public record. Transactions affecting property titles, such as ownership changes, liens, and leases, are usually recorded (by a County Recorder for example), so that the general public has access to the information.  
   
Recording fee A fee charged by the government to file records of real estate.
   
Recourse loan A recourse loan is a secured debt facility extended to a  direct participation program or limited partnership that provides the lender with an ownership claim on the entity's general assets in addition to the specified collateral. More generally, a recourse loan can also be a guaranteed loan, where the lender can go after the guarantor for payment if the borrower defaults. 
   
Recurring debt Recurring debt is any repeating payment obligation that can't be canceled. Child support payments and loan payments are both recurring debts. An individual's total recurring debt level is considered by the lender during the loan approval process.
   
Red flag A red flag, in general, is a sign of a potential problem. In investing, a red flag is a factor that can potentially reduce the earnings power of a publicly traded company. A red flag, in this sense, can be almost anything that would affect the company's operations, from pending legislation to technological advances. 
   
Redemption Debtors sometimes may keep exempt secured property even though they owe money on it by paying the creditor the market value of the property rather than the amount of the debt.
   
Redevelopment or Enterprise Zone A Redevelopment or Enterprise Zone is an area that the government designates as needing incentives to promote business activity. Businesses that open or operate within the designated zone may be eligible for special tax breaks. 
   
Redlining The illegal practice sometimes used by shady lenders and insurance companies to deny loans and other services to people because of their neighborhood or ethnicity.
   
Refinance wave A refinance wave is a trend of mortgage refinancing that is prompted by a large drop in market interest rates. The rate drop must large enough that borrowers can save a noticeable amount of money in total interest and monthly payment amount, even after considering the out-of-pocket closing costs associated with a refinance.  
   
Refinancing Repaying a mortgage with another mortgage which has a lower interest rate. Homeowners typically take advantage of turning their equity into cash.
   
Refinancing risk Refinancing risk is the chance that the costs for renewing a debt facility will be higher than expected. Say, for example, that a company owes $100,000 on a short-term, interest-only loan. At maturity, if the company can't pay off the debt, it must be refinanced at whatever rate is available, given prevailing economic conditions. There's a risk that the best rate available will be higher than the company can afford. 
   
Refund A refund is a return payment of previously collected funds. In taxes, for example, the government sends a refund check to taxpayers who overpay during the tax year. 
   
Refundable credit Refundable credit is a tax credit that can result in the government owing funds to the taxpayer. Refundable credits can reduce a taxpayer's tax liability to a negative number, such that the government then owes the negative amount to the taxpayer. 
   
Regional bank A regional bank focuses its services on a target customer base that's defined by a large geographic area, such as a state. Regional banks are somewhat larger than community banks, but they don't have a national presence. 
   
Registered Education Savings Plan - RESP Registered Education Savings Plan, or RESP, is a college savings program available in Canada. Contributions are made with after-tax money, but earnings made within the plan grow tax-free.
   
Registered Pension Plan - RPP Registered Pension Plan, or RPP, is a pension benefit trust available in Canada. An employer establishes the RPP, and contributions are made by the employer and employee. Contributions are tax-free and earnings are tax-deferred. Taxes are incurred on withdrawals made from the plan. 
   
Registered Retirement Income Fund - RRIF Registered Retirement Income Fund, or RRIF, is an annuity program available in Canada. RRIFs are often funded by Registered Retirement Savings Plans (RRSPs). The RRIF is structured to provide a stream of income payments to the accountholder during retirement. These income payments are taxed as income.  
   
Registered Retirement Savings Plan - RRSP A Registered Retirement Savings Plan, or RRSP, is a retirement trust available in Canada. Similar to the U.S. IRA, the RRSP allows for tax-deductible contributions and tax-deferred earnings. Money held in the RRSP can be invested in stocks, mutual funds, bonds, etc. 
   
Registered Retirement Savings Plan Contribution - RRSP Contribution A Registered Retirement Savings Plan contribution, or RRSP contribution, is a tax-deductible deposit made to an RRSP, which is a retirement trust available in Canada.  RRSP contributions are subject to annual limitations, but any allowable amounts not used during the year can be carried forward indefinitely. 
   
Registered Retirement Savings Plan Deduction - RRSP Deduction A Registered Retirement Savings Plan deduction, or RRSP deduction, is the tax break that occurs when a Canadian taxpayer deposits money into an RRSP retirement trust. The contribution amount can be deducted from the taxpayer's taxable income, thus reducing the individual's tax liability for the year.
   
Registered Retirement Savings Plan Deduction Limit - RRSP Deduction Limit Registered Retirement Savings Plan deduction limit, or RRSP deduction limit, is a cap on the tax breaks allowed for contributions made to a RRSP Canadian retirement trust. Deduction limits are calculated from the taxpayer's annual income, with adjustments made for certain pension transactions and unused RRSP deductions from previous years. The RRSP deduction limit is listed on the taxpayer's Notice of Assessment. 
   
Regulation G Regulation G is legislation pertaining to loans made by lenders and other corporations to fund the purchase of securities.  It was adopted by the Federal Reserve Board in 1968. 
   
Regulation T Regulation T is legislation pertaining to cash and margin accounts offered to consumers by brokerages. This Federal Reserve Board regulation limits margin loans to 50 percent of the purchase price of the securities.
   
Regulation U Regulation U is the Federal Reserve Board legislation that defines the requirements under which commercial lenders can offer credit secured by margin stock. Regulation U applies to commercial banks and credit unions, but not securities brokers or dealers. 
   
Regulation Z A federal banking rule that implements the Truth-in-Lending Act. It requires standardized disclosures of credit costs.
   
Rehabilitation mortgage A home loan that is used to make improvements and to reconstruct the property. Sometimes this type of mortgage is rolled into the initial mortgage.
   
Rehabilitation mortgage or rehab mortgage A rehabilitation mortgage (rehab mortgage) is a real estate loan that finances both the purchase of a home and specified improvements to the property. Usually, the borrower will have to submit a detailed outline and cost estimate for the improvements during the loan approval process. After the purchase amount of the loan funds, the lender will set up an escrow account to hold and distribute the improvement portion. 
   
Rehypothecation Rehypothecation is a bank's pledge of customer-owned securities held in a margin account for the purposes of securing a loan. 
   
Reinstate To reinstate is to restore or renew something. A past-due loan, for example, can be reinstated to current status once the necessary repayments are made. Also, insurance coverage can lapse due to non-payment, but the insured usually has a certain period of time to make the necessary premium payments and have the coverage reinstated. 
   
REIT REIT stands for real estate investment trust.  This is an exchange-traded security that invests in real estate holdings such as commercial office buildings or mortgage loans. REITs receive tax benefits in return for passing 90 percent or more of their earnings to shareholders.
   
Rejection Rejection is denial of an application, such as for a loan or an insurance policy. 
   
Relationship or member of household test Relationship of member of household test is one of five checks that confirm whether you can claim another individual as a dependent on your U.S. tax return. According to the relationship test, you can claim the individual as a dependent if that individual is your child, adopted child, stepchild, foster child, parent, stepparent, grandparent, sibling, half-brother, half-sister, step-sibling, child of a sibling, uncle, aunt, or relative by marriage (an in-law). Spouses are not dependents. 
   
Release clause Release clause is legal language in a mortgage loan agreement that allows a portion of the property to be released from the loan collateral after a certain percentage of the debt has been repaid. 
   
Release of liability A release of liability is the lender's termination of a debtor's responsibility to repay monies borrowed.  
   
Reliction Land that is made available when a sea or river permanently recedes.
   
Relocation benefits A benefit that a company gives an employee when the company has asked the employee to relocate for the company's benefit. These may include moving, packing, transportation, and storage. It may also encompass trips to look for real estate and temporary housing.
   
Relocation company A relocation company is a business that earns fees for helping transferred employees move to a new community.
   
Relocation mortgage - relo A relocation mortgage, or relo, is a real estate property loan designed specifically for transferred employees. Relos have special characteristics, such as discounted closing costs or closing costs paid for by the employer. Relos can also trade at a premium on the secondary market.  Because data indicates that relocated employees tend to move at regular intervals, the prepayment rate on these mortgages tends to be more predictable.
   
Remaining balance The amount left to pay on a loan.
   
Remaining principal balance Remaining principal balance is the amount of borrowed funds that has not been repaid as of a certain date. 
   
Remaining term The amount of time it will take to pay off the loan.
   
REMIC (Real Estate Mortgage Investment Conduit) A tax entity that issues multiple classes of investor interests (securities) backed by a pool of mortgages.
   
Remote deposit capture Remote deposit capture is a banking service that eliminates the need for a bank to present a physical check to another bank for processing. Instead, the checkholder scans the check and forwards the scan (but not the check itself) to the paying bank for processing. 
   
Renegotiable rate Renegotiable rate is the interest rate attached to a short-term loan that's structured with a balloon payment due at maturity. During the short-term period, the interest rate is fixed; at maturity, however, the lender has the option to refinance the remaining amount due at a higher interest rate. 
   
Rent loss insurance Rent loss insurance is a policy that protects an investment property owner from a loss in the property's rental value due to damage. 
   
Rent to own Rent-to-own describes an agreement between a merchant and a consumer whereby the consumer may use certain goods (usually furniture or appliances) temporarily by paying a periodic fee. The consumer can stop paying the fee and return the goods at any time. The consumer can also choose to purchase the goods by paying the periodic fee for a specified length of time, or by making an additional lump sum payment.  The exact terms of this option would be stated in the rent-to-own agreement.
   
Rental reimbursement Rental reimbursement is an optional type of auto insurance that pays for the cost of a rental car while your insured car is being repaired after an accident. 
   
Renter's insurance An insurance policy that pays for the loss and damage of personal property but not the real estate.
   
Reorganization plan Reorganization plan is a set of agreements made in a bankruptcy proceeding between a bankrupt individual or business, its creditors and the court. The plan specifies how certain past-due debts will be repaid over a specific timeframe, usually five years or less. During this time, the debtor must also remain current on other debts as they come due. Reorganization plans are an alternative to liquidation.  
   
Repayment Repayment is the settlement, or paying back, of a debt. 
   
Repayment period Repayment period is the window of time when further draws cannot be made against a home equity line of credit or unsecured line of credit; the only transactions allowed are repayments. 
   
Repayment plan A modification of an existing loan after the borrower has been delinquent. Usually used when the borrower misses payments but the lender does not foreclose.
   
Replacement cost Replacement cost is the estimated expense of buying or building an asset to replace another asset. Replacement cost is relevant for insurance purposes, because the replacement of a used asset is likely to cost more than the asset's market value. 
   
Replacement reserve fund Replacement reserve fund is an account maintained by a homeowners or condominium association.  The money in the fund is used to replace property in common areas, such as swing sets or greenbelt benches. 
   
Replevin Replevin is a legal proceeding taken by one who wishes to recover personal property that's illegally held by someone else. Replevin can, for example, involve a creditor's seizure of personal property (not real estate) that was used as collateral for debt. 
   
Repossession When a lender takes back the property when the borrower stops making payments.
   
Requested cash out The amount of money you request to get back from your mortgage transaction.
   
Required minimum distribution Required minimum distribution, or RMD, pertains to traditional, SEP, and SIMPLE IRAs.  The IRA accountholder must take a certain amount of money out of the account by April 1 of the year he turns 70-1/2, and then every year thereafter. The exact amount is dependent on the person's age and life expectancy. If the RMD isn't taken, the accountholder will be charged an excise tax by the IRS. 
   
Required minimum distribution - RMD Required minimum distribution, or RMD, pertains to traditional, SEP and SIMPLE IRAs.  The IRA accountholder must take a certain amount of money out of the account by April 1 of the year he turns 70-1/2, and then every year thereafter. The exact amount is dependent on the person's age and life expectancy. If the RMD isn't taken, the accountholder will be charged an excise tax by the IRS. 
   
Resale value The selling price that would be negotiated by a willing seller and buyer for an existing home or property.
   
Rescheduled loan Rescheduled loan is a debt facility that has been restructured due to the borrower's inability to make scheduled payments under the previous terms. Usually a rescheduled loan will have the maturity date extended from what was specified in the original loan agreement. 
   
Rescission Rescission is the cancellation or annulment of a contract or obligation, often by mutual consent of the parties involved. In mortgage lending, for example, federal law provides the borrower with the right to rescind a mortgage agreement within three days of signing the document. 
   
Reserve Reserve is any amount set aside to cover unexpected circumstances. In personal finance, a reserve can be the household's emergency fund. In asset-based lending, the reserve is the value of the collateral over and above the debt outstanding. 
   
Reserve fund Reserve fund is an amount of money set aside to cover unexpected circumstances. A homeowners association, for example, might have a reserve fund that's used to pay for periodic repairs. Financial advisors recommend that households maintain a reserve fund that's equivalent to three to six months of living expenses. Reserve funds can also be called emergency funds. 
   
Reset Reset, in finance, refers to the update of an interest rate, so that it retains a specific relationship to a reference rate. On an adjustable-rate mortgage loan, for example, the rate is stated as a margin plus a specified reference rate. If this loan is structured to be reset annually, then the interest rate would be adjusted once a year to reflect any reference rate changes that occurred over the previous 12 months. 
   
Reset frequency Reset frequency is the rate of occurrence of changes to an interest rate on an adjustable-rate loan. Reset frequency is specified in the loan documentation. 
   
Resident alien A resident alien is an individual who lives in one country, but has citizenship in another. Resident aliens in the U.S. typically have a current green card, or have had a green card within the last calendar year. In the U.S., resident aliens generally pay the same taxes as U.S. citizens.
   
Residential mortgage Residential mortgage is a loan that's secured by residential property. A residential mortgage is generally a long-term debt facility that can be structured with either fixed or adjustable interest. In the U.S., residential mortgage interest is tax-deductible. 
   
Residual income Residual income is the money left over from earnings after debts are paid. Typically, residual income is analyzed in terms of one month's income and debt requirements; the level of one's residual income is a factor that lenders consider when evaluating a borrower's creditworthiness. Higher residual income indicates that the individual will be more capable of meeting required debt payments when unexpected expenses arise. 
   
Residual interest Residual interest is the interest available to lower tranches of investors in a real estate mortgage investment conduit.  Residual interest isn't paid out until all regular interest payments have been made to the higher tranches of investors. 
   
Residual value An agreed upon amount which represent the value of the car at the end of a lease.
   
RESPA See Real Estate Settlement Procedures Act
   
Respite care Respite care is temporary, short-term care of an ill, disabled, or invalid person, usually for the purposes of giving the primary caregiver a break. Respite care can be provided in-home or in another location, as agreed upon by the primary caregiver, the person needing care, and the respite provider. 
   
Restrictive covenant A restrictive covenant is a rule that limits someone's rights, usually either a borrower or a property owner. Homeowners associations place restrictive covenants on property owners to keep them from using the property in ways that are considered detrimental to the neighborhood. Commercial loan agreements also might include restrictive covenants, to prohibit the business from taking actions that may hinder its ability to repay the loan. 
   
Restructured loan When a mortgage's basic terms, such as interest rate, term and monthly payment, have been changed to prevent foreclosure.
   
Retail lender A retail lender is a financial institution that lends money to individual borrowers by way of mortgage loans, auto loans, and personal loans. Consumer banks, mortgage lenders, and credit unions are retail lenders. 
   
Retail lending Retail lending is the service of lending money to individual consumers, such as homebuyers and auto buyers. 
   
Retail note Retail note, also called a retail bond, is a type of debt investment that pays a fixed rate of interest for a specified time period. Retail notes are subordinated (meaning they have a lower priority relative to other debt) and unsecured. Investors purchase retail notes from a broker or from the issuer, which is usually a large corporation. 
   
Retire To retire, in terms of employment, is to leave a job, either to seek another job, or to stop working entirely. In terms of debt, to retire is to pay off or fulfill a debt obligation. 
   
Return on investment A percentage which dictates how much you invest in making improvements versus how much it is worth to someone who is potentially interested in buying your home.
   
Returned or "bounced" check charge Returned or "bounced" check charge is a fee charged to an accountholder when the bank returns a check unpaid because the account balance was not high enough to cover the check amount. 
   
Reverse mortgage A type of loan that allows seniors homeowner to use the funds from their built-up equity. There are no payments due until the borrower moves, dies, or the property is sold. The final payment will not exceed the proceeds from the sale of the home.
   
Reverse-annuity mortgage Reverse-annuity mortgage is a type of real estate property loan that provides a stream of income payments to an elderly homeowner. These income payments are guaranteed until the borrower passes away. Debt repayments are not required until the borrower no longer lives in the home; at that time, the lender gains ownership of the home and sells it to recover the funds borrowed. 
   
Revocable beneficiary A revocable beneficiary is a designated person who will receive a payout from an insurance policy, and who does't have to consent to being removed from the policy. With a revocable beneficiary, the policyholder has the option to replace the designated person if circumstances change. This differs from an irrevocable beneficiary policy, which requires the beneficiary's permission for any changes made to the policy beneficiary.  
   
Revocable trust Revocable trust is a legal entity created to hold assets that allows the grantor of the trust to make changes to certain trust provisions. Income generated by trust assets are usually distributed to the grantor during her lifetime; after the grantor passes away, the assets are distributed to the trust beneficiaries. 
   
Revolver Revolver describes a credit card holder who doesn't pay off the full balance outstanding at the end of each billing cycle. The majority of credit card holders are revolvers, because they allow some of the debt to roll over into the next billing period. 
   
Revolving credit A line of credit, typically a credit card, that does not have a specified repayment schedule but may require a minimum payment to cover interest and contribute to paying off principal.
   
Revolving line of credit Revolving line of credit is a debt instrument that allows the borrower to re-borrow amounts after they've been repaid. The lender approves the borrower for a certain debt limit, then allows the borrower to borrow (up to the limit), pay down, and borrow again until maturity. At maturity, the outstanding balance must be repaid, or the line of credit must be renewed.  
   
RHS Loan RHS loan is a debt that's either originated by the Rural Housing Service (RHS) through the United States Department of Agriculture (USDA), or guaranteed by RHS and the USDA. RHS is an agency of the USDA. The agency manages many programs, including some designed to support homeownership in rural areas. The term RHS loan can refer to any one of several RHS loan or mortgage loan programs.
   
Rich Rich describes someone who has great wealth. The term can also be used to refer to the class of people who have great wealth. More generally, rich can describe something that has a large supply of something else, as in "Avocados are rich in nutrients."
   
Rider Rider is an add-on option in an insurance policy, that's used to provide the insured with an extra type of coverage that would otherwise not be included in the policy.  
   
Right of first refusal The agreement by an owner to give another party an opportunity to buy the property before offering it to anyone else.
   
Right of recourse Right of recourse is a lender's privilege to pursue recovery of an unpaid debt through legal channels. 
   
Right of rescission A right which allows a borrower to change his or her mind and cancel a loan within three days. Applicable to auto, home loans and refinancing.
   
Right to use vacation interval option Right to use vacation interval option is a type of timeshare ownership. The timeshare owner has the right to stay at the resort for a certain number of weeks per year, for a specified number of years. Alternatively, the owner may have a certain number of points, which can be exchanged for stays of a specified length. The timeshare owner doesn't stay in the same unit every time. 
   
Risk Risk is the danger of experiencing loss or harm. Risk is a primary concept in both insurance and in investing. Insurance companies set premium levels based on estimated risk of loss.  Investors choose their securities positions based, in part, on the level of risk that they can tolerate. 
   
Risk discount Risk discount is the reduction in yield an investor accepts in return for reduced risk. As an example, an investor may voluntarily choose to purchase a government bond that yields 4 percent, rather than a corporate bond that yields 5 percent. The decision to take the lower yield (or risk discount) reflects the investor's preference for virtually risk-free government bonds versus low-risk corporate bonds. 
   
Risk tolerance Risk tolerance is an investor's capacity to accept declines in the value of her investment portfolio. An investor with a low risk tolerance accepts lower returns for the security of knowing that the portfolio won't suffer drastic decreases in value. An investor with a high risk tolerance is willing to take more chances in the hopes of a higher return. 
   
Risk-based mortgage pricing Risk-based mortgage pricing is the practice of offering lower-rate mortgage loans to more creditworthy borrowers, and higher-rate mortgage loans to less creditworthy borrowers. 
   
Roll in When you include certain closing costs, such as origination and settlement fees into the mortgage. This results in lower closing costs and higher monthly payments.
   
Roll in loans A refinancing loan that rolls any closing costs or fees into the loan.
   
Roll over Roll over is a type of loan that gives the borrower the option of renewing the debt at the maturity date. 
   
Roll-in loans Roll-in loans are mortgage refinance loans that include the upfront closing costs in the loan amount. Rolling in the upfront costs allows the borrower to refinance, presumably to take advantage of a lower interest rate, without having to pay much out of pocket. 
   
Rollover Rollover is the automatic renewal of a fixed time deposit, such as a CD, for the same maturity, but at an updated interest rate. Rollover also refers to the reinvestment of certain retirement accounts within the allowed window of time following a change in employment. 
   
Rollover mortgage Rollover mortgage is an intermediate-term debt secured by real estate. The rollover mortgage has a fixed rate, but the loan expires in three to five years without fully amortizing. At maturity, the mortgage is renewed at the then-current interest rate. 
   
Roth 401(k) Roth 401(k) is an employer-sponsored retirement savings plan that combines elements of a traditional 401(k) and a Roth IRA. As with the Roth IRA, contributions are made with after-tax money, but withdrawals and investment gains are tax-free. Notably, the Roth 401(k) has no income limitations, so anyone can contribute up to the specified limit, regardless of income. 
   
Roth conversion Roth conversion is the process of transferring assets from a Traditional, SEP, or SIMPLE IRA into a Roth IRA. There may be tax consequences associated with a Roth conversion. 
   
Roth IRA A Roth IRA is a type of tax-advantaged retirement savings account available in the U.S. Contributions to a Roth IRA are made with after-tax money, but earnings and qualified withdrawals are tax-free. Qualified withdrawals can't be made until the account has been open for five years and the accountholder reaches aged 59 1/2. Roth IRAs are subject to annual contribution limits and income limitations. 
   
Routing Transit Number - RTN Routing transit number, or RTN, is a nine-digit identification code used by U.S. banks. The RTN is printed on checks and facilitates clearing and processing. 
   
Royalty income Royalty income is fees paid for the right to use another's property, right, or artistic creation. Royalty income is usually paid as a percentage of sales.  A product inventor, for example, might contract with a manufacturer to receive 2 percent of the sales revenue every time the manufacturer sells one of the inventor's products. 
   
Rule of 72 Rule of 72 is a means of estimating how many years it will take to double an investment that's earning a certain interest rate. To make the calculation, divide the compound interest rate by 72.  A 10 percent interest rate, for example, will double an investment in 7.2 years. 
   
Rule of 78 Rule of 78 is a means of calculating an interest rebate on a prepaid installment loan where the interest is added to the loan balance upfront. The number 78 comes from the sum of 1 through 12, for the months of the year. If the borrower pays the loan after one month, the borrower will be charged 12/78 of the interest and refunded the rest. If prepayment occurs after two months, the charge will be 23/78, with the 23 representing 12 plus 11. 
   
Rule of 78s Rule of 78 is a means of calculating an interest rebate on a prepaid installment loan where the interest is added to the loan balance upfront. The number 78 comes from the sum of 1 through 12, for the months of the year. If the borrower pays the loan after one month, the borrower will be charged 12/78 of the interest and refunded the rest. If prepayment occurs after two months, the charge will be 23/78, with the 23 representing 12 plus 11. 
   
Running yield Running yield is a portfolio's return divided by the portfolio's market value, expressed as a percentage. 
   
Rural Housing Service An agency of the US Department of Agriculture that provides farmers or other rural inhabitants financing to purchase land or homes when they cannot get a loan from other financial providers. These loans are have low interest rates and usually require no down payment.
   
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S&L S&L stands for savings and loan association. This is a financial institution that accepts deposits and uses them to originate mortgage loans. 
   
S&P 500 Mini S&P 500 Mini is an investment that represents a designated percentage of an S&P derivative contract. S&P 500 futures and options contracts are exchange-traded and cash-settled; the Minis have these same characteristics, but trade at much lower prices. These lower prices make Minis available to individual investors, who use them for hedging purposes.  
   
S&P no-load index fund An S&P no-load index fund is a fee-free mutual fund that invests in the stocks that comprise the S&P 500 stock market index. The S&P 500 contains primarily large-cap, American corporations. 
   
S&P/Case-Shiller Home Price Indexes S&P/Case-Shiller Home Price Indexes track the volatility in U.S. home prices by collecting data on single-family properties that have been sold more than once in regular market transactions. There's a national index and indexes for many metropolitan statistical areas (MSAs).
   
Safe harbor Safe harbor is a concept referenced in SEC legislation that protects a public company's management team from liability for providing financial outlooks that later turn out to be inaccurate. To receive such protection, the management team must provide financial forecasts that reflect what management knows at the time the forecasts are published. 
   
Safekeeping Safekeeping is the holding or guarding of an asset in an area where it cannot be damaged or stolen. Some financial institutions provide safekeeping as a service to their customers. 
   
Salary reduction contribution Salary reduction contribution is an option on employee-sponsored retirement and savings plans, where the employee elects to direct a portion of her pre-tax earnings into the plan. The salary reduction contribution is also called elective deferral contribution. 
   
Sale and leaseback Sale and leaseback is an arrangement whereby a property owner sells a property to another party who agrees to lease that property to the seller, once the transaction closes. A sale and leaseback is appropriate when the original owner must sell, but wants to continue using the property.
   
Sale contract A sale contract is a legal document specifying the terms of a property title transfer. The property can be real estate, or some other tangible asset.  The contract would describe the asset, specify the selling price, and list any contingencies. 
   
Sale leaseback When the seller transfers the deed to the buyer, then rents the property from the new owner.
   
Sales agreement An agreement which is also known as the "purchase agreement" or "agreement of sale", is the contract signed by buyer and seller stating the terms under which the property will be sold.
   
Sales and purchase agreement - SPA A sales and purchase agreement, or SPA, is a legal document that binds a buyer and seller to fulfill their respective parts of a sale transaction. SPAs are used with real estate and with large business transactions. 
   
Sallie Mae The largest originator of student loans.
   
Same property rule Same property rule is a tax regulation pertaining to the use of IRA funds. When non-qualified withdrawals are made from an IRA, the funds must be rolled back into an IRA in the same form as they were withdrawn to avoid penalties. In other words, if an individual withdraws cash from one IRA, he must roll that money into a new IRA as cash and not as securities.
   
Sample sale A sample sale is a strategy to move excess merchandise. The strategy is popular with high-end clothing designers that have sample product on hand; the samples were probably used originally to sell clothing orders to retail distributors. Usually, the sample merchandise is in good shape, such that sample sales are great finds for bargain shoppers. 
   
Sandwich lease A sandwich lease is a property use arrangement between a lessee and property owner, where the lessee subleases the property to a third party. 
   
SARSEP IRA A SARSEP IRA is an outdated form of IRA that was offered by small companies for the benefit of their employees. Employees made pretax contributions to the SARSEP IRA through paycheck deductions. SARSEPS were replaced by SIMPLE IRAs in the 1990s. 
   
SAT Stanford Achievement Test. A standardized test including math, critical reading and writing skills assessments. This test is often required for college admissions and most scholarships.
   
Satisfaction of a mortgage A document provided by the lender as evidence that the loan has been paid off. Usually, it is up to the borrower to remove the lien from the public record.
   
Satisfaction of debt Satisfaction of debt is the fulfillment of an obligation to repay borrowed money. 
   
Savings Savings is the amount of one's income that remains after expenses are deducted. 
   
Savings account Savings account is a bank or credit union deposit that earns interest and can be withdrawn on demand. 
   
Savings and Loan Association A state or federally-chartered financial institution that was a primary a provider of home mortgages by using depositor's savings as financial backing.
   
Savings bank Savings bank is a financial institution that accepts consumer deposits and pays interest on those deposits. 
   
Savings incentive match plan for employees Savings incentive match plan for employees is a type of tax-advantaged retirement plan offered by employers that have fewer than 100 employees.  More commonly known by the acronym SIMPLE, these plans are available as IRAs or 401(k)s.  
   
Schedule A Schedule A is an income tax form used by U.S. taxpayers who itemize their deductions.  Taxpayers are allowed the option of taking a standard deduction, or calculating their deductions by itemizing certain expenses. Only those taxpayers who itemize their deductions need to complete Schedule A. 
   
Schedule D Schedule D is an income tax form used by U.S. taxpayers who incur realized, taxable capital gains or losses during the tax year. 
   
Scheduled recast A scheduled recast is a planned restructure of a mortgage loan's payment structure. An interest-only mortgage, for example, may have a scheduled recast.  This would be the date the mortgage converts from interest-only to fully amortizing. On that date, the outstanding debt balance is used to calculate the payment amount required so that the mortgage will be fully paid off at maturity. 
   
Schedules Schedules, in general, are forms intended for information reporting. The term is also used in reference to certain IRS tax forms. 
   
Schematic designs The structural plans for a building's mechanical, plumbing, and electrical systems.
   
Scholarship A financial reward that does not need to be repaid.
   
Schumer Box Schumer Box is an information table that's included with credit card solicitations; the box specifies the card's interest rates and important terms. The rate must be listed in 18-point type or larger, while the other terms must be at least 12-point type. Senator Chuck Schumer authored the legislation that requires card issuers to provide this information. 
   
Second chance loan A second chance loan is a debt offered to a borrower who has prior credit problems.  Generally, this type of loan is characterized by restrictive terms and a high interest rate. The borrower generally stays with the second chance loan just long enough to rebuild her credit history, then refinances to a more affordable debt as soon as she qualifies. 
   
Second mortgage A mortgage made subsequent to the previous one or subordinate to the first one. The lenders of the second mortgage gets paid after the first mortgage is paid.\n\nSee further First mortgage
   
Second surgical opinion Second surgical opinion is another physician's perspective on whether a surgery is necessary. Some health insurance plans require two medical opinions before agreeing to cover the costs of a major surgery. 
   
Secondary CD Secondary CD is a time deposit issued by a brokerage that can be bought or sold prior to maturity. Secondary CDs are theoretically more liquid than bank CDs (which must be held until maturity), but there's no guarantee that the investor will be able to sell the CD for his full investment plus interest.
   
Secondary mortgage market Buying and selling of mortgages to collect more funds and grant new loans. It gives more liquidity to lenders. 
   
Second-chance auction scam Second-chance auction scam is the practice of offering non-winning bidders the opportunity to purchase the item through unauthorized forms of payment, after the close of an online auction. Sometimes, this scam is used to obtain the bidder's bank account information fraudulently. 
   
Seconds Seconds is the term used for merchandise that's badly damaged or flawed. Seconds are usually sold at huge discounts off the standard prices. 
   
Second-to-die insurance Second-to-die insurance is a policy that's written to two people, and pays benefits when the last surviving person dies. Usually, this type of insurance is used by married couples for the purpose of paying estate taxes or supporting surviving children. 
   
Section 1031 Section 1031 is the part of U.S. tax law that defines a method for investors  to defer capital gains taxes. Such deferral is allowed when the appreciated property is exchanged for a "like-kind" property that's to be used for business or investment purposes. An investor, for example, may sell one rental property and buy another with no tax effect. If the second property is sold with no corresponding reinvestment, taxes would then be assessed. The gain is calculated from the cost basis of the original investment. 
   
Section 1035 exchange Section 1035 exchange is the name for a tax-free trade of one annuity contract for another, as defined by Section 1035 of the U.S. tax code. Such a trade must involve the same policyholder on both contracts and contracts that are equivalent in value. 
   
Section 1245 Section is 1245 is the part of the U.S. Tax Code that explains how the sale of depreciable property may qualify as a taxable capital gain rather than taxable income. 
   
Section 1250 Section 1250 is the part of the U.S. Tax Code that mandates the treatment of gains earned from the sale of real estate that has been depreciated on an accelerated basis. Any gain in excess of what would have been earned had the property been depreciated on a straight line basis, is taxed as regular income. 
   
Section 179 expense Section 179 expense is the name for a fixed asset purchase that's expensed through the income statement immediately, rather than being capitalized on the balance sheet and depreciated over time. This treatment is allowed under Section 179 of the U.S. Tax Code. 
   
Secure option ARM Secure option ARM is a real estate mortgage loan that's characterized by payment options and an initial fixed-rate period followed by an adjustable-rate period. For a specified period of time, the borrower has the option to make one of generally three  payment amounts. Making the lowest amount results in negative amortization; making the middle amount pays only the monthly interest; and making the largest amount reduces the principal balance. Because the mortgage carries a fixed-rate initially, these payment levels remain stable unless the negative amortization limit is reached. At some point, the fixed-rate period will end, and the loan will convert to an adjustable rate. 
   
Secured card Secured card is a credit card that's tied to a cash deposit. The cash deposit serves as collateral; the card issuer can dip into that deposit if required minimum payments on the account are not made. Secured credit cards are used by individuals who don't qualify for a traditional credit card because they have poor or no credit. 
   
Secured credit card Secured credit card is a credit card that's tied to a cash deposit. The cash deposit serves as collateral; the card issuer can dip into that deposit if required minimum payments on the account are not made. Secured credit cards are used by individuals who don't qualify for a traditional credit card because they have poor or no credit. 
   
Secured debt Secured debt is a loan that's supported by collateral. Mortgages are secured, because the lender takes a lien on the property, and has the right to foreclose in a default situation. Auto loans are also secured, because the lender takes a lien on the vehicle. 
   
Secured loan A loan covered by a security, guarantee or collateral
   
Securities lending Securities lending is the practice of loaning securities positions. A broker might wish to borrow securities (rather than buy them) to cover a short position without impacting the stock value. These loans are usually supported by cash collateral. 
   
Security Property which is designed and used as collateral.
   
Security deposit An amount, often one month's payment, the dealer holds to be sure that the car will be returned in good condition.
   
Security freeze Security freeze, also called a credit freeze, is the temporary blocking of an individual's or business's debt payment history as maintained by a credit agency. The freeze blocks all access to the specified credit report and score, in order to prohibit the opening of new credit accounts under that identity. 
   
Security interest Security interest is a lender's/creditor's ownership stake in a property that's taken in support of a debt obligation. 
   
Security loan Security loan is a debt that's supported by collateral. The lender receives an ownership stake in the collateral that allows for seizure of the property if the borrower defaults. 
   
Self employed borrower When a person is self employed, they may be looking for a type of mortgage that will let them be flexible in the amount of the payments from month to month. Many mortgage companies will work with someone in this situation to find a mutually agreeable mortgage situation.
   
Self-amortizing loan A self-amortizing loan is structured so that the sum of all the payments equals the total interest and amount borrowed. If all payments are made as scheduled, the debt balance will be zero at maturity. Traditional mortgages are self-amortizing, for example. Adjustable-rate loans can also be self-amortizing, but the payment amount will change with any changes to the interest rate. 
   
Self-amortizing mortgage A self-amortizing mortgage is a real estate property loan that's paid off at maturity, as long as all payments are made as scheduled. Normally this would be a fixed-rate mortgage, but adjustable-rate mortgages can be self-amortizing also. In a fixed-rate structure, the payment amount would be fixed; an adjustable-rate mortgage would have a fluctuating payment amount.   
   
Self-directed IRA Self-directed IRA is a tax-advantaged retirement savings program that puts the responsibility for investment decisions on the account owner. A self-directed IRA allows the account owner to invest in other asset classes (such as real estate) besides securities. The IRS requires a trustee or custodian to hold the assets.  
   
Self-employed person Someone who does not work for anyone else and who is running their own business, or trade and is the sole proprietor.
   
Self-employment tax Self-employment tax is the Social Security and Medicare contribution that's required from self-employed taxpayers. These contributions are normally withheld from the taxpayer's paycheck; self-employed taxpayers don't receive a paycheck, so they're assessed these taxes separately. 
   
Seller broker One who earns a commission from the seller of a property in exchange for finding a buyer and assisting in the negotiations.
   
Seller carry-back An agreement in which the finance is provided by the property owner along with an assumed mortgage.
   
Seller financing Seller financing is a type of real estate financing that involves a loan made by the seller to the buyer. This arrangement might be made if the buyer doesn't qualify for a traditional bank loan in the full amount of the purchase. The seller earns interest on the debt, and takes a security position in the property, just as a bank lender would. Seller financing is also called seller take-back. 
   
Seller take-back Seller take-back is a type of real estate financing that involves a loan made by the seller to the buyer. This arrangement might be made if the buyer doesn't qualify for a traditional bank loan in the full amount of the purchase. The seller earns interest on the debt, and takes a security position in the property, just as a bank lender would. Seller take-back is also called seller financing. 
   
Seller's agent An agent who works for a real estate firm and is loyal to the seller.
   
Seller's market When the number of interested buyers is greater than the number of sellers which make the prices increase.
   
Semi-custom home A house in which the buyer cannot alter the layout, but can specify certain amenities.
   
Seminole quarterbacking Seminole quarterbacking is a slang term that means choking under pressure, or failing when the stakes are highest. 
   
Senior Senior, in reference to debt, describes an obligation that has a higher priority claim on secured assets. If the assets have to be liquidated, the senior creditor is paid before junior creditors can be paid. In mortgages, the first mortgage is senior to the second mortgage. 
   
Senior debt Senior debt is a loan that has repayment priority over another loan. If the borrower's assets have to be sold off to repay creditors, the creditor holding the senior debt obligation will be paid back first. In mortgages, a first mortgage is a senior debt, and the second mortgage is a junior debt.  
   
Senior security Senior security is an issued debt (such as a bond or debenture) that has a priority over other securities. If the security issuer's assets must be liquidated, the holders of the senior security would be repaid before holders of junior securities. 
   
SEP SEP is the abbreviation for Simplified Employee Pension Plan. SEP is a type of IRA that's established by the employer on behalf of the employees. The employer can make tax-deductible contributions to employee SEPs up to a specified limit. 
   
SEP IRA SEP IRA is a type of tax-advantaged retirement savings plan. The SEP is established by an employer on behalf of the employees. The employer can make tax-deductible contributions to employee SEPs up to a specified limit. 
   
Separate return Separate return is a tax return filed by a married taxpayer who does not file jointly with his spouse. Married taxpayers can choose to file one joint return or two separate returns.  Generally, it's beneficial to file jointly, but in some situations, it's advantageous to file separately. 
   
Series HH bond A Series HH bond is U.S. Treasury income security. The U.S. Treasury no longer issues Series HH bonds, although they're still held by investors and earning income. The bonds pay interest twice a year for 10 years from the issue date; thereafter, the rate us set by the Treasury. 
   
Serious delinquency When a single-family mortgage that is 90 days or more past due, or a multifamily mortgage that is two months past due.
   
Service charge Service charge is a generic term for a fee charged to a customer. Service charges are usually associated with a violation of account terms, such as allowing an account balance to drop below a specified minimum. 
   
Service contract A contract that covers certain car repairs or problems after the manufacturer's or dealer's warranty expires. These warranties are sold by car manufacturers, dealers and independent companies.
   
Servicer An organization or company that collects monthly mortgage principal and interest payments from homeowners and manages escrow accounts. This company will also handle the collection of funds and the payment for your property taxes when they are due.
   
Servicing Servicing loans include collecting monthly payments, keeping records of loan progress, assuring payments of taxes and insurance etc.
   
Servicing strip Servicing strip is a security that's backed by mortgage servicing fees. Theoretically, mortgage servicing fees are a long-term stream of cash flows.  As such, the securities backed by these fees trade on the secondary market, similar to the way in which mortgage-backed securities trade. 
   
Settle Settle is to resolve. In financing, to settle is to pay off a loan obligation. In legal matters, to settle is to come to an agreement on a dispute. In investing, to settle is to finalize the processing of purchase transaction transfers. 
   
Settlement cost (HUD guide) A book given to consumers after completing a loan application that provides an overview of the lending process.
   
Settlement sheet Settlement sheet is a statement that lists the distribution of funds associated with the closing of a real estate transaction. Items on the settlement sheet might include loan fees, property tax prepayments, insurance premiums, etc. 
   
Settlement statement A document detailing who has paid what to whom.
   
Severance pay Severance pay is compensation provided by an employer to an employee upon termination of that person's employment. 
   
Share appreciation mortgage Share appreciation mortgage is a type of real estate property loan where the homeowner/borrower exchanges a portion of the property's future value increases for a lower interest rate. Say, for example, that the agreement provides the lender 25 percent of the property's appreciation over a period of 10 years. If the property value increases $100,000 in that time, the lender would be due $25,000. Usually, the lender receives its portion of the appreciation when the home is sold.  If the borrower doesn't sell the home, he must pay the lender its portion in cash. 
   
Share certificate A share certificate is a time deposit product issued by credit unions. Similar to a certificate of deposit (CD), the share certificate earns a fixed payment if it's held for the designated time period. 
   
Shared equity partnership An arrangement where one buyer lives in a home and the other has money invested in the property as an investment. The partners split the capital gain after the property is sold.
   
Shared-appreciation mortgage A home loan in which the lender offers a very low interest rate in exchange for a share in the home's profit upon its sale.
   
Shared-equity partnership Shared-equity partnership is a property ownership arrangement between a homebuyer and an investor. The investor funds a portion of the home purchase and then splits the capital gains proportionally with the homeowner when the property is sold. 
   
Short hedge Short hedge is the process of selling a derivative that isn't owned (i.e., selling short), where the derivative hedges against an investment that is owned. In other words, a short hedge strategy is pursued to reduce risk associated with an investment that has already been purchased. 
   
Short refinance Short refinance is the replacement of a mortgage, usually with a smaller mortgage, when the borrower is already in default.  This is done to transition the borrower to a more affordable payment structure. The lender has to write off the difference between the old mortgage and the new mortgage, but this may be preferable to foreclosure.  
   
Short sale A short sale is an investing strategy that involves the sale of securities that are borrowed and not owned. The seller agrees to the transaction with the expectation that the security will go down in price; when the decline occurs, the seller can purchase the security on the open market at a lower price than the amount generated by the short sale. 
   
Short tax year Short tax year is the term for a tax period that's less than on year.  This only pertains to businesses, and can result from the midyear inception of a business or a change in the business's fiscal year-end date. 
   
Short-term Short-term describes something that has a brief duration. In accounting, short-term usually means 12 months or less. Short-term debt, for example, is an obligation that's due and payable within one year. 
   
Short-term bond fund Short-term bond fund is a mutual fund that invests in debt securities that mature in five years or less. 
   
Short-term capital gain or loss Short-term capital gain or loss is the amount earned or lost on an asset that was sold after being held for less than 12 months. Short-term capital gains have a less favorable tax impact than long-term capital gains (which result from the sale of assets held longer than 12 months). 
   
Sight letter of credit Sight letter of credit, or sight L/C, is a document used in international trade that's payable to the holder if presented with certain supporting documentation. Sight L/Cs are different from traditional L/Cs in that the traditional L/C guarantees payment, but is not immediately payable.
   
Signature loan Signature loan is another name for an unsecured personal loan. This type of loan is made on the strength of the borrower's credit rating and history, and no collateral is pledged. Banks may offer signature loans to their wealthy, long-standing customers. 
   
Silent second mortgage A silent second mortgage is a secondary real estate loan that's not disclosed to the primary lender. Since both a first and second mortgage lender take a security interest in the home, each lender should be notified of the other lender's existence. Not doing so is usually fraud, particularly if the second mortgage is used to fund the down payment that the first mortgage lender requires. 
   
SIMPLE SIMPLE is an acronym for Savings Incentive Match Plan for Employees, which is a type of retirement plan established by employers with a relatively small number of employees. SIMPLE plans can either be IRAs or 401(k)s. Employers can make tax-deductible contributions to employees' accounts, either as a matching contribution, or a flat non-elective contribution. 
   
Simple interest Interest computed only on the principal balance, without compounding.
   
Simple interest bi-weekly mortgage A simple interest bi-weekly mortgage is a real estate loan that's structured with a payment due every two weeks.  These payments are applied to the principal balance as soon as they're received. Because the payments are applied immediately, rather than being held and applied once monthly, the borrower realizes reduced interest costs over time. 
   
Simple interest loan The interest accruing on the unpaid principal amount, excluding the compounding interest of total amount due.
   
SIMPLE IRA A SIMPLE IRA is a tax-advantaged retirement savings plan established by an employer for the benefit of employees. SIMPLE IRAs can be set up by employers that have 100 or fewer employees, and tax-deductible contributions can be made by employees and the employer.  
   
Simple-interest mortgage A simple-interest mortgage is a real estate property loan that accrues interest daily rather than monthly. The daily interest rate is calculated by dividing the stated interest rate by 365 days; the resulting percentage is then applied to the outstanding balance. A simple-interest mortgage will result in higher total interest costs relative to a traditional mortgage.  This is because traditional mortgages accrue interest based on 12, 30-day months, which equates to 360 versus 365 days. 
   
Simplified employee pension plan Simplified employee pension plan is a tax-advantaged retirement savings plan commonly used by small businesses and self-employed individuals. Referred to as the SEP IRA, this program has features similar to a traditional IRA. For example, contributions made are tax-deductible and earnings in the account are tax-deferred. 
   
Single Single is a tax filing status used by unmarried individuals who don't meet the requirements for any other filing status. 
   
Single agency When the agent or broker represents and owes his or her fiduciary to only one party in a real-estate transaction.
   
Single-payment loan A single-payment loan features no periodic principal payments. Instead, the entire amount borrowed is due at maturity. 
   
Sinking fund/reserves Sinking fund/reserves is an account where a debt issuer makes periodic deposits that will eventually be used to settle a large, long-term debt. A bond issuer, for example, might use a sinking fund to ease the repayment burden at bond maturity. The existence of the sinking fund is attractive to investors, because it lowers the risk associated with the security. 
   
Skimming Skimming is a fraudulent practice of using a small device to scan the magnetic strip on a credit card, and record its information. Skimming is also a new product pricing strategy that involves setting a high price to attract a luxury-oriented customer. As the product matures in the marketplace, the price is usually lowered gradually to increase sales volume. 
   
Skip payment mortgage A feature in some mortgages where the borrower can choose not to make the payment in a given month. The borrower would not be considered late or delinquent, but would incur higher interest charges as a result.
   
SLMA SLMA stands for Student Loan Marketing Association. This entity is now known as Sallie Mae, and is the leading provider of student loans in the U.S. 
   
Smart cards Smart cards is a generic term referring to plastic, wallet-sized cards that hold data via a magnetic strip on the back. Smart cards can be designed to function as credit cards, identification cards, access cards, etc. 
   
SMI SMI is supplemental medical insurance, also known as Medicare Part B. SMI is voluntary coverage that pays for certain medically necessary or prescribed, preventative benefits; the insured must pay a monthly premium. 
   
Smishing Smishing is similar to phishing, only the practice uses SMS messages sent to cell phones rather than emails. The scam involves SMS messages that direct recipients to a website that either collects personal information (such as credit card numbers), or installs malware on the recipients' phones. 
   
Snowball Snowball is a debt pay-off technique involving pay-down of the highest-rate debt first. The borrower makes minimum payments on all accounts, except for the one with the highest rate. To the highest-rate account, the borrower pays as much as he can afford. Once this account is paid off, the borrower focuses on the highest-rate account of those remaining. This process is repeated until all accounts are paid down. 
   
Social security number The eight digit number every US citizen is given at their birth. It is possible for a non-citizen who is a permanent resident to obtain a number. This number is used for identification, applying for loans, and for disbursement of social security monies upon retirement. It is recommended the one memorizes this number and is cautious when making it available to prevent identity theft.
   
Soft inquiry A designation a person's credit report that indicates that someone has asked for a copy of his or her report. They are not included in the formula for determining a person's credit score.
   
Soft loan Soft loan is a debt that carries a below-market interest rate. Soft loans are only made under special circumstances, such as between family members, or by an established government for the purposes of funding a developing country. 
   
Spec home A house built before a buyer has been found, but with the assumption that one will be found.
   
Special assessment A special assessment is a tax charged to a property and paid by the property owner.  Proceeds from the tax are used to pay for specific public improvements that benefit the assessed property. An example of such a benefit might be the replacement of a curb or sidewalk in front of the assessed property. 
   
Special finance Special finance is the segment of the auto loan industry that serves poor-credit or no-credit borrowers. A special finance loan will be more expensive than a loan to a better qualified borrower, because the risk of default is higher. 
   
Special forbearance A situation where the lender arranges a revised repayment plan for the borrower that may include a temporary reduction or suspension of monthly loan payments in order to prevent a loss or foreclosure.
   
Special purchase Special purchase describes retail goods that were purchased in bulk by the retailer from the manufacturer. The retailer receives a discount from the manufacturer for the size of the order, and passes part of that discount to consumers via lower prices. 
   
Specific-shares method Specific-shares method is a technique for calculating taxable capital gains on securities trades, for the purposes of minimizing taxable capital gains. Using this method, an investor would designate which shares he'd like to sell among the various identical shares held. For example, say an investor bought 50 shares of Acme Company for $55 each, and later bought 25 shares for $60 each. When the investor is ready to sell 10 shares, he can ask his broker to sell the $60 shares, because they have a higher cost basis. The resulting sale would minimize the investor's capital gain and tax effect. 
   
Speculation home or spec home or built on spec Speculation home, spec home, and built on spec all refer to a home that is built before a buyer is secured. The developer makes the investment to build the home on the belief that a buyer will be found. 
   
Spending phase Spending phase refers to the time in one's life after retirement when household cash flow comes from retirement savings, government subsidies, or investment income, rather than wages and salary. Spending may exceed income, because the individual might be traveling, following new interests, or otherwise enjoying his free time.
   
Spim Spim is the term for unwanted text messages; spim is the text equivalent of spam. 
   
Spit Spit is the term for unwanted messages sent via VoIP, or Internet telephony. Spit is the Internet phone equivalent of spam. 
   
Spoofing Spoofing is a stock market scam that temporarily and erroneously inflates a stock's price. A trader will place a large and anonymous order for a certain stock through an electronic communication network, and then cancel the order just a moment later. The initial trade order causes the stock price to spike, which attracts buyers to that position. As buyers move to purchase the stock, the share price rises. The original trader can then sell his position at an inflated price. 
   
Spousal contributions Spousal contributions are monies deposited to a spousal IRA. If a single income married couple files a joint tax return, the non-working spouse may be qualified to make tax-deductible contributions to a Spousal IRA. Generally, an individual with no taxable income doesn't qualify for tax-deductible IRA contributions. 
   
Square footage Square footage is the floor area of a building or room, calculated by multiplying the length in feet by the width in feet. 
   
Stafford Loan Available to all families regardless of financial need. There are two types of loans: subsidized Staffords for students with financial need, and unsubsidized Staffords for those without need.
   
Stafford loans Stafford loans are federal government loans made to college students to help pay for education-related expenses. Subsidized Stafford loans are available to students with demonstrated financial need; the federal government pays the interest on these loans while the student is still in school. Unsubsidized Stafford loans are more widely available.  The student is responsible for the interest that accrues prior to graduation, but no payments are due until after graduation. 
   
Standard card Standard card is a basic credit card that has no perks or added features. The standard card is differentiated from a gold or platinum card. 
   
Standard deduction Standard deduction is a fixed tax deduction amount, usually based on filing status, that can be taken by individuals who do not itemize. The standard deduction represents a base level of income that doesn't get taxed. 
   
Standard mileage rate Standard mileage rate is an IRS-specified amount that can be used to calculate tax-deductible vehicle expenses. The mileage rate is used in lieu of tracking actual gas and car maintenance expenses. 
   
Standard Payment Calculation The calculation which determines the amount needed to repay the loan in monthly installments.
   
Standby loan commitment Standby loan commitment is an offer of credit made by a lender that expires on a specified date. The standby loan commitment is expressed in a written document that states the terms of the proposed debt, as well as the expiration date of the offer. 
   
Start rate Start rate is a term used for an adjustable-rate mortgage's opening interest rate.  
   
Starter home A home that is relatively small and inexpensive and bought as a first home; often a fixer-upper.
   
State tax ID or registration number State tax ID or registration number is a series of digits that functions as an identifier for a business, in the same way that a Social Security number would function for an individual. Businesses are usually required to obtain state tax ID numbers. 
   
Stated income/stated asset mortgage - SISA Stated income/stated asset mortgage, or SISA, is a type of mortgage loan that doesn't require verification of the borrower's income and assets during the qualification process. SISA mortgages are appropriate for self-employed individuals, for example, who have sufficient income to make the mortgage payment, but can't document that income. This type of loan falls within the Alt-A mortgage category, and is therefore priced higher than a prime mortgage would be. 
   
Statement A statement is a written record of transactions on an account, such as a checking account or credit card account, that occur within a specified period of time. 
   
Statement savings Statement savings is a traditional, liquid savings account on deposit with a bank or credit union. Statement savings accounts have low fees, but also pay very low interest rates. 
   
Statutory employee A statutory employee is any taxpayer who reports wage and earnings income on a Schedule C, but is deemed an employee by statute. Social Security and Medicare taxes for statutory employees are the responsibility of the employer.  Hhme workers, for example, who fulfill their duties on employer-furnished equipment (such as a computer), may be deemed statutory employees. The statutory employee rule prevents employers from avoiding the responsibility of paying certain employee taxes. 
   
Steering An illegal process in which a prospective buyer is shown properties only in specific neighborhoods where the residents share the buyer's ethnicity.
   
Step-rate mortgage A mortgage with smaller payments at the beginning and then gradually increasing the payment amount after the first two years.
   
Sticker price Sticker price is the asking price on an automobile for sale at the dealer. The sticker price includes the manufacturer's suggested retail price, plus the cost of options and various dealer charges. By federal law, car dealerships are required to display the sticker price on the vehicle's window. 
   
Sticky downward Sticky downward describes a trend of falling real estate values, where the home prices decline more slowly than they rise during a hot real estate market. The term can be applied to other up and down trends, as well. Wages, for example, can rise quickly, but an employer would have a difficult time trying to lower them. 
   
Stock power Stock power is a power of attorney that allows one to transfer ownership of a security to another individual or entity. When a bank takes stock as loan collateral, the bank may require the borrower to provide the bank with stock power. 
   
Stock savings plan Stock savings plan is a program that gives Canadian taxpayers tax breaks for investing in securities that support the provincial economy. 
   
Stock screener Stock screener is an online database tool that allows investors to select a set of investment preferences, and then search for stocks that match them. Preferences can relate to P/E ratio, market cap, EPS growth, etc.  
   
Stockholder's equity A sum of proceeds from the issuance of stock and retained earnings less amounts paid to repurchase common shares.
   
Store of value Store of value is any asset or currency that holds value and can be exchanged for something else of value. In normal economic periods, currency is a store of value. When extreme economic cycles cause the public to distrust the value of a currency, consumers will begin trading with other stores of value, such as gold. 
   
Straight life annuity Straight life annuity is a retirement planning product available through insurance companies, which makes regular payments to the annuitant (the person covered by the annuity) until death. There's no beneficiary on this type of policy, so the payments cease at the annuitant's passing. This product may be appropriate for one who's primarily concerned with cash flow, but not for an individual who needs to provide for dependents.
   
Strategic asset allocation Strategic asset allocation is an investing strategy that involves keeping certain percentages of capital invested in specific asset classes. Because each investment will perform differently over time, the investor must periodically review the allocation of invested capital, rebalancing the positions to the desired percentages of the total portfolio. 
   
Strike price Strike price is the specified price at which an option contract can be exercised. On a call option, the option holder can buy the security at the strike price; on a put option, the option holder can sell the security at the strike price. Strike price is also called exercise price, or grant price. 
   
Stripper Stripper is a slang term referencing a homeowner who repeatedly cashes out home equity by refinancing. The term has the negative implication that the money raised through these refinances is spent frivolously rather than invested for future growth. Those who strip their equity in this fashion have a false sense of wealth.  
   
Structured finance Structured finance is the segment of the commercial lending industry that provides complex debt products and solutions that are tailored for specific situations. 
   
Student Aid Report (SAR) Summarizes the information provided on the FAFSA and indicates the expected family contribution (EFC).
   
Student loan Loans given to a potential student upon entering college or university to help pay for tuition and related expenses. Student loans carry lower interest charges than is typically available to consumers.
   
Student loan interest deduction Student loan interest deduction is a tax break available to U.S. taxpayers who paid interest on loans used for higher education during a given tax year. 
   
Student Loan Marketing Association Student Loan Marketing Association is the former name for Sallie Mae, a federally established entity that's now an independent, publicly traded corporation. Sallie Mae is the largest provider of student loans in the country. 
   
Sub prime borrower A borrower who has been late on a mortgage payment or has a less-than-perfect credit report.
   
Sub prime mortgage A mortgage granted to a borrower considered sub prime, or has a low credit score due to a late payments or a default.
   
Subagent A commissioned real estate agent who finds a buyer for a property, but is not the property's listing agent.
   
Subcontractor A person or company that does specialty work for a general contractor.
   
Subindex Subindex is a set of securities that comprise one specialized group of securities, and are also part of a more general group. An example is the Dow Jones Agricultural Sub-Index (DJAIGAG). 
   
Subject property The home that you intend to obtain the mortgage on.
   
Submortgage A submortgage is a loan taken by a mortgage lender, where a customer's mortgage (which was made by the lender) is pledged as the collateral. 
   
Subordinate financing Subsequent mortgage to the first one on the property when a new loan is taken out.
   
Subordinate loan mortgage whose priority is below that of another mortgage, like a second or third mortgage or a home-equity loan.
   
Subordinated Subordinated describes a debt obligation that has a lower priority claim relative to senior creditors. The term can also describe the credit that's owed the lower priority debt. If a liquidation is required, the subordinated creditors are paid with any funds left after the senior creditors have been paid.  
   
Subordinated debt Subordinated debt is a debt obligation that has a lower priority claim relative to senior debt. If a liquidation is required, the creditors holding subordinated debt (also called subordinated creditors) are paid with any funds left after the senior creditors have been paid.  
   
Subordination clause A subordinated clause is language found in certain mortgage agreements and bond indentures that automatically gives the current debt a higher priority claim over any debt that may be issued thereafter. 
   
Subprime Subprime describes borrowers or loans that are less-than-ideal. A subprime borrower, for example, usually has a low credit score. A subprime loan is a debt obligation that doesn't meet conservative underwriting standards, either because of the borrower's qualifications, or the structure of the debt itself. 
   
Subprime borrower Subprime borrower is a debtor who has a low credit score due to poor management of credit accounts in the past. 
   
Subprime credit card Subprime credit card is a revolving credit account provided to individuals who have low credit scores, such that they don't qualify for a conventional credit card. A subprime credit card will have a much higher interest rate than would be typical on a conventional credit card. 
   
Subprime lender A subprime lender is a financial institution that specializes in making loans to lesser-qualified borrowers. Subprime lenders charge more to make these loans, because there's a higher risk of default. 
   
Subprime loan A subprime loan is a debt obligation made to a lesser-qualified borrower.  The subprime loan is typically characterized by a higher interest rate and more restrictive terms relative to a conventional loan of a similar type. 
   
Subprime mortgage Subprime mortgage is a real estate property loan made to a lesser-qualified borrower.  A subprime mortgage carries a higher interest rate and more restrictive terms relative to a conventional (also called prime) mortgage. Borrowers of subprime mortgages generally have low credit scores and past documented credit issues. 
   
Subrogate To subrogate is to substitute one party for another with respect to a legal claim. When a collection agency takes responsibility for a debt on behalf of a client, for example, subrogation occurs. 
   
Substandard health annuity Substandard health annuity is a type of insurance contract that makes periodic payments to an individual whose lifespan is likely to be shortened by a pre-existing and documented health condition. Such an annuity would have a higher periodic payment amount because of the expected, shortened lifespan of the annuitant. 
   
Subvented lease Subvented lease is a discounted lease offered by an auto dealer via the manufacturer, usually for vehicle models that aren't selling well. The discount is achieved by lowering the rate of interest, or raising the vehicle's residual value. 
   
Super sinker Super sinker is a specialized bond that has a long-term yield and a short-term maturity. This type of bond might be backed by home mortgages; since a certain percentage of mortgages are paid off early, these prepayments can be used to repay principal to bondholders at maturity. 
   
Superannuation Superannuation is another term for a company pension plan. This is an employer-established retirement plan that can be funded by employer or employee contributions. Contributions may be tax-deductible, and earnings within the account may be tax-deferred.
   
Supplemental Educational Opportunity Grant (SEOG) Paid for by a combination of government and college funds, these awards are given to undergraduates and can be up to $4000. Pell grant recipients receive highest priority for the grants.
   
Supplemental medical insurance Supplemental medical insurance is an extra form of health insurance coverage that adds to an individual's primary coverage. Medicare Plan F, for example, is supplemental medical insurance. 
   
Support test Support test is one of five tests used to determine if you can claim another individual as a dependent on your tax return. To fulfill the support test, you must have funded more than half of the other person's living expenses during the tax year. 
   
Surcharge Surcharge is an extra assessment, tax, or amount owed. 
   
Surrender charge Surrender charge is an assessment imposed for cancelling a contract early. Insurance companies typically assess surrender charges when their customers cancel life insurance policies or annuity contracts prior to maturity. Surrender charge is also called surrender fee. 
   
Surrender fee Surrender fee is an assessment imposed for cancelling a contract early. Insurance companies typically assess surrender fees when their customers cancel life insurance policies or annuity contracts prior to maturity. Surrender fee is also called surrender charge. 
   
Surtax Surtax is an extra assessment imposed on an individual or entity. Surtaxes are normally in the form of a tempory increase in income tax, which might  be used to finance a major war or initiative. 
   
Survery A drawing of a property by a lead surveyor showing precise measurements, boundary encroachments and other physical properties. 
   
Survey Exact measurements of a parcel's dimensions, relation to landmarks and location and dimensions of improvements. The survey will allow you to view from above, your lot lines and encroachments between you and your neighboring lots.
   
Suspicious Activity Report - SAR Suspicious Activity Report, or SAR, is a filing made by a financial institution when it suspects that an individual or entity is involved in money laundering activity or other related criminal violations of federal law. The SAR is filed with the Financial Crimes Enforcement Network (FinCEN). 
   
Swap A swap is an agreement between two parties to trade streams of cash flow generated by two different financial instruments. This would be done to reduce or offset exposure to one factor, such as fixed interest rates or adjustable interest rates. When a swap involves interest rates, the two parties agree to exchange cash flows related to specified rates and a specified principal amount, but they don't actually exchange the principal. Swaps can also involve two different currencies, where the parties are interested in reducing their exposure to certain foreign currency fluctuations. 
   
Sweat equity It is a process where the future homeowner actually contributes to the construction of his home and thus accrues equity on his home. 
   
Sweep account Sweep account is a deposit account that automatically transfers all or some of the cash on deposit into another, high-yield account. Brokerages typically offer this service, where all cash not invested in securities is automatically transferred into a money market fund or similar instrument. 
   
Swing loan Swing loan is a short-term debt obligation that has a defined payoff source, such as a refinance to a long-term loan. Swing loans are also called bridge loans, or bridge financing. 
   
Synthetic ID fraud Synthetic ID fraud is a credit/identity scam that involves creation of new, fictional identities. The criminals will often combine made-up information with a real Social Security number to create the new identity. 
   
Synthetic lease Synthetic lease is an operating lease that's not recorded on the balance sheet as a liability, but is instead treated as an expense. The leased property is also not recorded on the balance sheet. Synthetic leases also allow the lessee to realize certain tax advantages that are normally associated with capitalized property or equipment, such as accelerated depreciation deductions included in the lease payments. 
   
Systematic withdrawal plan - SWP Systematic withdrawal plan, or SWP, is a mutual fund account feature that automatically withdraws funds from the account at regular intervals, and pays those funds out to the accountholder. An individual on a fixed income might benefit from SWP, as would someone who needs to meet mandatory retirement plan withdrawal requirements.
   
Systematic withdrawal schedule Systematic withdrawal schedule is a means of taking money out of an annuity account; the annuitant makes withdrawals of specific amounts at regular intervals until the account value has been depleted. A systematic withdrawal schedule does not guarantee the annuitant lifetime payments. 
   
T Back to top
T (tiered) T (tiered) is a notation in some interest rate tables that indicates a varied pricing structure. Usually the rate noted is the lowest rate available. 
   
Tactical asset allocation - TAA Tactical asset allocation, or TAA, is an investing strategy that involves keeping certain percentages of total capital invested in specific asset classes. Because each investment will perform differently over time, the investor must periodically review the allocation of invested capital, rebalancing the positions to the desired percentages of the total portfolio. In some cases, the investor may wait to rebalance the portfolio to achieve certain short-term growth objectives. 
   
Tangible personal property Assets outside of real estate that you can put your hands on. Examples may include business equipment, and vehicles.
   
Tax and penalty-free withdrawals Tax and penalty-free withdrawals are qualified transactions that remove money from an IRA without incurring taxes or fines. Prior to retirement, individuals are allowed to withdraw money from an IRA under certain circumstances, such as to pay for the costs of higher education. 
   
Tax avoidance Tax avoidance is the practice of using legal methods to minimize income taxes. Taxpayers might pursue various levels of tax avoidance, such as contributing pretax earnings to retirement accounts, purchasing tax-free municipal bonds, or making qualified charitable contributions. 
   
Tax bracket Different levels of income are taxed differently; your income determines what bracket you are in.
   
Tax certificate ID Tax certificate ID is a series of identifying digits that's issued to a business by the state for the purposes of collecting sales tax. 
   
Tax credits These are like coupons for the supermarket. You can use them to reduce the amount of tax you owe.
   
Tax deductions Amounts of money that the IRS allows you to subtract from your income before computing your income tax. These are similar to tax credits.
   
Tax deferral Postponing your taxes to a later date or even year. This will only delay your liability it will not make it disappear.
   
Tax deferred Earnings and income that are not taxable now but will be at a later date. This is most common in retirement plans distributions.
   
Tax exempt The part of your income that is not taxable or subject to tax.
   
Tax fairness Tax fairness is the concept that all taxpayers should be assessed an equivalent and fair level of income taxes. Those who argue for tax fairness take issue with tax loopholes that unfairly benefit a minority segment of taxpayers. 
   
Tax home Tax home is a taxpayer's primary place of residence. This concept is relevant in the calculation of tax-deductible travel and transportation expenses. 
   
Tax impound Money collected by the lender for the annual tax payment.
   
Tax liability The amount of money you owe for taxes.
   
Tax lien When taxes are not paid, a tax lien is put against the property before it can be sold in order to secure that the taxes will be paid.
   
Tax preference items Tax preference items are specific income and expense figures that are used in the calculation of Alternative Minimum Tax (AMT) in U.S. tax law. Some of the tax preference items are: addition of personal exemptions, addition of standard deduction, subtraction of any state and local tax refund included in gross income, and changes to passive activity loss deductions. 
   
Tax return Tax return is a generic term for the set of forms that are submitted to a taxing authority (such as the IRS) which document an individual's or entity's annual tax liability. 
   
Tax sale When the government sells a property in order to recover unpaid taxes. The property is sold to the highest bidder at a public auction after the owner and mortgage company have been given notice.
   
Tax schedules Forms published by the IRS for persons with a taxable income of more than $100,000, used to calculate their income tax.
   
Tax shelter An investment that makes it feasible to hide money from taxes. The IRS has out restrictions on tax shelters when it seems the sole purpose of the investment is to evade paying taxes.
   
Tax stamps A levy mandated by the government on the transfer of ownership of real estate.
   
Tax tables Tables published by the IRS for taxpayers with an income of 100,000 or less used to calculate their income tax.
   
Taxable estate Taxable estate is the value of a decedent's estate that's used to calculate death taxes, also known as estate taxes. Generally, the taxable estate equals the total value of the assets, less liabilities and any tax-deductible assets. 
   
Taxable income Your gross income minus all of your adjustments, deductions, and exemptions.
   
Taxes Taxes are fees assessed by a governing body. Taxes are typically assessed on transactions (sales tax), property (property and vehicle taxes), and income (income tax). 
   
Tax-exempt security Tax-exempt security is a mutual fund or bond that produces income which isn't subject to federal income taxes. Tax-free municipal bonds are an example.  These are fixed-income securities issued by state, county, city, or local governments. Mutual funds that invest strictly in tax-exempt securities would also be tax-exempt. 
   
Tax-free money market mutual fund Tax-free money market mutual fund is a diversified investment fund that invests only in short-term, tax-exempt securities. These funds are usually purchased through brokers and provide income that's free from federal tax liability. 
   
Taxpayer Bill of Rights  
   
Taxpayer Identification Number Your social security number as an individual or your employee identification number (EIN) for your business.
   
Tax-sheltered annuity Tax-sheltered annuity is a type of retirement planning instrument available to employees of tax-exempt organizations. Contributions are tax-deductible and earnings within the annuity aren't taxed until withdrawn. 
   
Tear down condition A house that is purchased so that is can be leveled to make a space for a brand new home.
   
Tear sheets Tear sheets are the summaries of public companies that are published by Standard & Poor's (S&P). An S&P summary includes an overview of the company's operations and key performance metrics. In advertising, tear sheets are pages removed from a publication and sent to an advertiser as proof that the advertisement was run. 
   
Tear-down condition Tear-down condition describes a residential home that's meager in relation to its physical property location. The land is likely to have a high value because, as an example, it overlooks a fairway or lake. Buyers who can afford to buy the land would most likely demolish the old home and build a new one. 
   
Teaser rate Usually seen on the mass mailings for credit card offers with a fantastic introductory rate used to lure consumers to switch credit cards. This rate is temporary and below market.
   
TED spread TED spread is a metric that's tracked as an indicator of market credit risk. It's calculated as the difference in pricing between a three-month U.S. Treasury bill, and three-month LIBOR. A widening of the TED spread indicates a greater risk of default among borrowers. 
   
Temporary lender A temporary lender is a financial institution that makes mortgage loans and then sells them on the secondary market immediately after close. Temporary lenders don't keep a portfolio of loans; they earn money through fees charged to the borrower, and by selling the loans at a premium. 
   
Tenancy by Entirety An agreement in some states where the husband and wife are considered one person and upon death, the other automatically assumes ownership.
   
Tenancy by the entirety Tenancy by the entirety is a property ownership arrangement used in some states by married couples. If the couple owns a home as tenants by the entirety, neither one of them can dispose of their ownership interest, and when one co-owner passes, ownership automatically transfers to the surviving co-owner. 
   
Tenancy in common Tenancy in common is a co-ownership arrangement that gives each owner the right to have his ownership interest transferred, upon his death, to a beneficiary. While living, both owners have an equal right to use the property. 
   
Tenancy in Partnership When a property is in the name of a partnership as opposed to individual names.
   
Tenants by entirety - TBE Tenancy by entirety, or TBE, is a property ownership arrangement used in some states by married couples. If the couple owns a home as tenants by the entirety, neither one of them can dispose of his or her ownership interest, and when one co-owner passes, ownership automatically transfers to the surviving co-owner. 
   
Tenement Tenement is a synonym for apartment, but the term often is usually associated with low-income housing in an urban area. 
   
Ten-year Treasury Constant Maturity Ten-year Constant Maturity Treasury is an index that's periodically published by the U.S. Treasury. The index value is calculated by adjusting the yields of recently auctioned U.S. Treasury bills and notes of varying maturities to the equivalent of a ten-year yield. 
   
Term The scheduled length of time for paying off a loan.
   
Term certain annuity Term certain annuity is a financial planning product that pays the holder (called the annuitant) a fixed periodic payment for a set time frame. Since there is no opportunity to extend the payments past the specified time frame, purchasers of term certain annuities should consult with a financial planner to determine if this is the most appropriate product available. 
   
Term deposit Term deposit is a savings product that can't be withdrawn until a specified amount of time has passed. The most common term deposit is a CD, which pays a higher yield than a liquid savings deposit. 
   
Term loan A term loan is a commercial debt made by a bank or finance company that's repaid with periodic principal repayments. Term loan debt can't be re-borrowed once it's paid off. 
   
Termination statement A termination statement documents a borrower's fulfillment of an asset-based debt facility. Once the loan has been paid off, the lender no longer has ownership rights to the assets that were used as collateral for the loan. 
   
Testamentary trust Testamentary trust is a property ownership arrangement that's established according to instructions within a will, and after the grantor has died. Generally, the trust will hold the decedent's property. An appointed executor must manage the property and make distributions to beneficiaries in accordance with the grantor's wishes.
   
Tester A tester is a person or thing that evaluates something's effectiveness or usefulness. 
   
The Fed Have you heard of Alan Greenspan? He is a Fed. He is the chairman of this seven member Board of Governors which is in charge of regulating and monitoring or economy and monetary policy so that we can find a stasis. The Fed is informal for the Federal Reserve System.
   
Therapeutic alternatives Therapeutic alternatives are medications that differ chemically, but treat certain conditions in the same way as other drugs. Therapeutic alternatives are often considered when the first choice of medication is prohibitively expensive. 
   
Third party originator The person or company that gathers all the pieces of a mortgage application and transfers or sells it to the lender.
   
Third-party administrator Third-party administrator, or TPA, is a company that's contracted to be a liaison between an insurance company and members of a group plan issued by that insurance company. 
   
Third-party originator Third-party originator is an entity or person who markets mortgages and collects mortgage applications from prospective borrowers.  These leads are turned over to a lender for funding. 
   
Third-party payer Third-party payer is an entity that's responsible for a person's medical expenses, e.g., an insurance company. 
   
Three-year rule Three-year rule refers to a tax law that discourages individuals from gifting assets to others when death is imminent, solely for the purposes of avoiding estate tax. Section 2035 of the tax code states that if certain assets are transferred or gifted to someone else within three years of the decedent's death, those assets must be included in the estate, and taxed accordingly. 
   
Thrift Thrift refers to a financial institution that holds deposits, primarily for individuals. 
   
Thrift savings plan - TSP Thrift savings plan, or TSP, is a defined-contribution retirement savings plan available to federal employees. The TSP functions like a 401(k) plan in that the employee makes contributions through automatic salary reductions, and the employing agency may have some contributing matching program. Contributions can be invested in one of several investment funds. 
   
Timber Investment Management Organization - TIMO Timber Investment Management Organization, or TIMO, is an entity that manages timberland investments on behalf of institutional investors. Some institutional investors diversify their portfolios by holding timberland investments, but they're not equipped to find and manage appropriate properties for maximum returns. TIMOs fill this need. 
   
Timberland investment Timberland investment is a tree farm, or managed natural forest, that's held by an institutional investor as part of an investment portfolio. Timberland investments are attractive to institutional investors because these properties tend to respond differently to economic conditions than stocks or bonds, which helps even out the return of the overall portfolio. Timberland investments are also relatively low risk, but produce strong returns. 
   
Time deposit Time deposit is a savings product that can't be withdrawn until a specified period of time has passed. In return for reduced liquidity, the depositor earns a higher yield relative to regular savings deposits. CDs are time deposits.  
   
Time note A time note is a contract related to a debt obligation that specifies the dates on which repayments are to be made. 
   
Time share When multiple people own a piece of property in which each owner has access to the property at intervals throughout the year.
   
TIPS TIPS, or Treasury inflation-protected securities, are U.S. Treasury-issued bonds that automatically adjust the principal for inflation, as measured by the consumer price index. Since interest is paid on the principal amount, the yield benefits from these periodic inflation adjustments. TIPS pay interest every six months, and the principal is repaid at maturity. 
   
Title A lawful document showing proof of a person's right to ownership of a property.
   
Title 1 A loan which is taken out to help a home owner make basic repairs and improvements to their home.
   
Title company The company which researches the property's title for liens. judgments, and obstacles which will impeded the sale, repairs and the title, supervises the closing, and ensures all money transactions are complete and accurate.
   
Title defect When others make a legal claim to property and make demands on the owner.
   
Title insurance Insurance that protects the lender's interests and the buyer's interests against loss resulting from dispute over title or ownership of a property
   
Title search An investigation into the title records to prove legal ownership of the seller's property and to check that there is no prior claim on liens.
   
Total debt service ratio - TDS Total debt service ratio, or TDS, is the percentage of an individual's income that must be used to make debt payments and mortgage payments, including insurance and taxes. This ratio is commonly evaluated when an individual applies for a mortgage loan.  A lower TDS is better, as this means the borrower has more capacity to withstand unexpected circumstances. 
   
Total expense ratio A ratio comparing the total amount of income against the total number of debt payments.
   
Total housing expense Total housing expense is the total of an individual's mortgage payments, inclusive of property taxes and homeowners insurance, plus any other required monthly debt repayments. 
   
Townhouse Typically, a series of homes which share a common wall but stand on individual lots. The owner holds the title to the land and the home.
   
TPA TPA, or third-party administrator, is a company that's contracted to be a liaison between an insurance company and members of a group plan issued by that insurance company. 
   
Trade equity When a piece of property is used in a swap for a down payment on a property. For example, trading a car for a down payment on a house.
   
Trade line Trade line refers to an account shown on a credit report. 
   
Trade lines Each different credit account listed on your credit report. Trade lines can affect your credit score and help determine what you are eligible for.
   
Trade-in value The amount of cash a car dealer will give you for your vehicle as a down payment in the purchase of a new car.
   
Trading account Trading account is an account held by an investor with an investment dealer that's used to settle securities purchases and sales. Trading accounts can hold cash, foreign investments, and various other types of securities. 
   
Trading down Making a move from a high end home to a less expensive home.
   
Trading up Making a move from a house into a more expensive home.
   
Traditional IRA The original self motivated retirement plan. A person may contribute money into their IRA annually depending on how much they've earned. These contributions may be tax deductible depending on your income and if you are covered by a retirement plan at your place of employment.
   
Traditional whole life policy Traditional whole life policy is a life insurance agreement that doesn't expire.  The policy ends when the insured dies and the agreed-upon payment is made to the insured's beneficiaries. Whole life policies build up cash value over time, which can be borrowed against or withdrawn by the insured. If the insured cancels the policy before death, he may receive a cash surrender value.
   
Trans fat Trans fat is an unsaturated vegetable oil that has been chemically altered to remain solid or semi-solid at room temperature. Trans fats are used to lengthen a food's shelf life. 
   
Transaction broker or agency The company that works for both the buyer and seller but makes it clear that they are not in a fiduciary relationship with either side. The broker will be hired to help them reach an agreement. The Switzerland of real estate.
   
Transaction broker or transaction agency Transaction broker, or transaction agency, is a real estate agent or firm that represents both buyer and seller in a real estate transaction. Neither buyer nor seller is represented by an agent that will pursue their best interests. Conflicts are sometimes resolved by bringing in an independent real estate professional. 
   
Transaction date Transaction date is the actual date that a sale was made, or an account action was taken. The transaction date may differ from the settlement date, which is the date on which the details of the transaction are recorded and finalized. 
   
Transfer Transfer is the switch of ownership rights to an asset from one party to another. A transfer can also be the movement of money from one account to another. Specific to IRAs, a transfer is the movement of assets from one retirement plan to another, where such movement qualifies as a tax-free, non-reportable incident. 
   
Transfer of risk Transfer of risk is a basic premise of insurance. The arrangement between an insured and insurance provider is always transfer of risk, because the insurance provider accepts financial responsibility for losses associated with certain events, should those events occur. The insurance company accepts a fee or premium for accepting the risk transfer. 
   
Transfer on death - TOD Transfer on death, or TOD, is a designation that can be placed on securities positions or accounts that keeps these assets out of probate when the owner dies. If the owner designated a TOD beneficiary, the securities will be immediately transferred to that beneficiary upon death. There's no change in the owner's rights to the assets while the owner is alive. 
   
Transfer tax A tax issued on the transfer of title in a real estate transaction.
   
TransUnion One of the three largest credit reporting agencies along with Experian and Equifax.
   
Treasury bill or Treasury note Treasury bill, or Treasury note, is short-term debt security that's issued and backed by the U.S. government. Treasury bills are sold at a discount, so that the value of the bond increases as the maturity date approaches. Investors realize yield by purchasing the bond at a discount, and then selling it for a higher price at a later date. 
   
Treasury index A grouping of indexes that are used to determine the interest rate changes on adjustable rate mortgages.
   
Treasury note or bill A US government debt with a maturity from one to ten years. Expressed as a note.
   
Triple net lease Triple net lease is a lease that assigns responsibility for taxes, insurance, and maintenance costs to the lessee rather than the property owner. Triple net leases are sometimes called net-net-net leases, or hell or high water leases.  
   
Trojan horse A Trojan horse is a malicious software program that's disguised as being legitimate, so that users inadvertently open the program and run it. Trojans are used by hackers to gain unauthorized access to other computers and files. 
   
Trust Similar to a will. A relationship where a person transfers valuables or assets to a trustee who manages this property for the benefit of the beneficiary.
   
Trust account An account which manages the earnest money, money set aside for repairs, and other prepaid closing monies. These accounts are managed by the broker or the escrow agent.
   
Trust deed Trust deed is a legally binding document that establishes ownership rights of a property. It's sometimes used to document the financing of real estate purchases, where ownership is assigned to a trustee until the loan is paid off. Ownership rights are transferred to the owner only after the debt obligation is fulfilled. In these arrangements, the trustee remains silent unless the borrower defaults. 
   
Trustee A person who manages the assets.
   
Truth in Lending Truth in Lending, also known as TILA, is federal legislation that addresses predatory lending practices. Under TILA, lenders must provide loan applicants with basic loan information, such as annual percentage rate (APR), minimum payment, annual fees, credit insurance fees, etc. This information, which is provided before loan funding, assists the applicant in budgeting and in comparing competitive loan offers.
   
Truth-in-lending act Disclosure in writing the terms and conditions of  mortgage charges and annual percentage rate (APR) as required by the federal law.
   
Tuition reimbursement plan A benefit offered by many companies as an incentive for their employees to continue their education by repaying for their tuition.
   
Two-cycle billing Two-cycle billing is a means of calculating finance charges on a credit card account. The finance charges are assessed by multiplying the rate by the average daily balance on the account for the past two months. This method tends to result in higher finance charges. 
   
Two-step mortgage A mortgage (ARM) with an adjustable interest rate where the borrower pays a certain interest rate (usually below market rate) for the first 7 years which is then later adjusted to the market rate for the remaining period
   
Two-year Treasury constant maturity Two-year Treasury constant maturity is an index that's periodically published by the U.S. Treasury. The index value is calculated by adjusting the yields of recently auctioned U.S. Treasury bills and notes of varying maturities to the equivalent of a two-year yield. 
   
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U.S. Department of Housing and Urban Development The U.S. Department of Housing and Urban Development, also known as HUD, is a federal department that establishes and enforces the country's housing policies. The Federal Housing Administration, or FHA, is part of HUD. 
   
Underinsured driver Underinsured driver is an optional coverage type available on auto insurance policies. Underinsured driver coverage pays the insured for any medical expenses or auto repair expenses that exceed the insurance limits on the at-fault party's policy. 
   
Underpayment penalty The penalty for not paying enough total estimated tax and withholding. You can avoid underpayment penalties by paying a percentage amount of last year's tax due or of the current year's expected tax due.
   
Underwater When you owe more on the loan for a property or car than the asset is worth; you have a feeling of being underwater.
   
Underwriting The process by which the lender decides if they will lend money. This decision is based on the value of the property, the borrower's credit history and any other relevant factors. It is also used to mean the process of issuing insurance policies.
   
Unearned income Income which comes from interest, dividends, capital gains or rents, as opposed to earned income, such as wages, tips and salaries.
   
Unearned interest Unearned interest is an account on a lender's balance sheet that represents interest amounts that were collected in advance of being accrued. 
   
Unified Managed Account - UMA Unified managed account, or UMA, is a fee-based investment management product that includes all of the assets in an investor's portfolio, including stock positions, mutual funds, hedge funds, separate accounts, etc. A unified account makes it easier for the investor or money manager to employ a comprehensive investing strategy and maintain proper asset allocations. 
   
Uniform Gift to Minors Uniform Gift to Minors, also known as UGMA, is a trust that allows minors to invest in securities. Parents establish UGMAs on behalf of their children, and any funds deposited by the parents are considered irrevocable gifts. When the child reaches the age of 18 or 21 (depending on the state), he receives full control of the assets in the account. 
   
Uniform Premarital Agreement Act Uniform Premarital Agreement Act is state legislation that gives the parties to a premarital contract the option to choose the state that will have jurisdiction over the premarital contract. The state can be one in which either party lives or plans to live. It can also be the state in which the couple is to be married. Not all states have passed the Uniform Premarital Agreement Act, which limits the legislation's effectiveness somewhat. 
   
Uniform Transfer to Minors Act - UTMA Uniform Transfer to Minors Act, or UTMA, is legislation that allows parents to establish a trust account for their children.  The trust account can invest in securities, as well as real estate, patents, royalties, and fine art on behalf of a minor child. Assets deposited to the account are subject to gift taxation laws. When the child reaches the age of 18 or 21 (depending on the state), she receives full control of the assets in the account. 
   
Uninsured driver or motorist Uninsured driver or motorist is an optional coverage type available on an auto insurance policy. Uninsured driver or motorist coverage pays the insured for injuries or damages that result from being hit by another driver who doesn't have auto insurance. 
   
Universal default Universal default is a policy of some lenders that allows them to punish borrowers who pay any creditor late.
   
Universal life insurance Universal life insurance is an insurance contract that remains in force for the insured's lifetime, pays a benefit to designated beneficiaries upon the insured's death, and builds a cash value over time. A portion of the premium goes towards the death payment, and a portion is directed into yield-generating investments. The insured has the ability to transfer funds between the two parts of the policy, such as using investment earnings to pay premiums. 
   
Unpaid dividend Unpaid dividend is a profit distribution to owners that has been declared but not yet remitted. 
   
Unrecorded deed document that transfers title to property, but which is not filed with a county recorder
   
Unscheduled recast Unscheduled recast is a recalculation of payments due on a loan that's triggered by something other than the passing of time since funding. Unscheduled recasts are usually triggered by certain events, which would be specified in the loan documentation. Negative amortization mortgages are subject to unscheduled recasts; when the balance reaches an upper limit on the negative amortization, a recast is triggered. In this case, the recast will increase the payment amount substantially. 
   
Unsecured Unsecured describes a loan that's not supported by collateral. Unsecured debt is riskier for the lender, because there's little recourse available if the borrower doesn't repay as promised. A traditional credit card is unsecured. 
   
Unsecured claim claim or debt for which a creditor holds no special assurance of payment, unlike a mortgage or lien; a debt for which credit was extended based solely upon the creditor's assessment of the debtor's future ability to pay.
   
Unsecured debt Debt that is not guaranteed by the pledge of any collateral. Most credit cards are unsecured debt, which is a main reason why their interest rate is higher than other forms of lending, such as mortgages, which employ property as collateral.
   
Unsecured loan advance of money that is not secured by collateral.
   
Unsecured personal loan An unsecured personal loan is a debt obligation that's made based on the integrity and credit history of the borrower; no collateral is taken by the lender. Generally, an unsecured personal loan is structured with a fixed-rate and fixed payment amount. The funds can be used for business start-up, debt consolidation, or even college tuition. 
   
Up-front costs costs that must be paid at the time of signing a car lease agreement. These can include the first month's payment, a refundable security deposit, a capitalized cost reduction or down payment, taxes, registration and other fees.