Page 82 - Book6E

Identity Theft: occurs when a criminal uses another individual’s personal information to commit fraud or other crimes.
Index: the economic indicator used to calculate interest-rate adjustments for adjustable-rate mortgages. No one can be sure when an index rate will go up or down.
Interest: the price paid for borrowing money, usually given in percentages and as an annual rate.
Layaway: purchase plans designed for people who want to purchase merchandise without credit or paying the full price immediately.
Liability Protection: if someone misuses your credit card, your maximum liability under federal law for unauthorized use is $50. The regulations that protect you from fraudulent use of your debit card are not as user friendly.
Margin: the number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.
Mortgage Brokers: companies that offer to find you a lender who is willing to make you a loan.
Mortgage Loan: a loan secured by real property, usually residential property like a house, condominium, or time-share property.
Payment Shock: industry term to describe the upward movement
of mortgage loan interest rates and its effect on borrowers. This is the major risk of an ARM, as this can lead to severe financial hardship for the borrower.
Period: the length of time between interest rate adjustments.
If interest rates are falling, a shorter period benefits the borrower. If interest rates are rising, a longer period benefits the borrower.
Points (discount points): one point is equal to 1% of the principal amount of your mortgage. These points usually are collected at closing and may be paid by the borrower or the home seller, or may be split between them.
Glossary