Glossary

A B C D E F G H I J K L M N O P Q R S T U V W XYZ

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Accelerated Cost Recovery System (ACRS) (Modified)
The Tax Reform Act of 1986, established the modified ACRS tax appreciation system by prescribing depreciation methods for each ACRS class in lieu of statutory tables. Equipment is assigned among 3, 5, 7, 10, 15, or 20 year classes depending on ADR lives.

Acceleration
The right of the mortgagee (lender) to demand the immediate repayment of the mortgage loan balance upon the default of the mortgagor (borrower), or by using the right vested in the Due-on-Sale Clause.

Accounts payable
Amount owing to creditors for goods and services on an open account.

Accounts receivable
Amount due from customers for merchandise or services purchased on an open account.

Adjustable rate mortgage (ARM)
Mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Also known as the renegotiable rate mortgage, the variable rate mortgage or the Canadian rollover mortgage.

Adjusted Basis
The cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken.

Adjustment Date
The date that the interest rate changes on an adjustable-rate mortgage (ARM).

Adjustment interval
On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically one, three or five years depending on the index.

Adjustment Period
The period elapsing between adjustment dates for an adjustable-rate mortgage (ARM).

Affordability Analysis
An analysis of a buyers ability to afford the purchase. Reviews income, liabilities, and available funds, and considers the type of mortgage you plan to use, the area where you want to purchase, and the closing costs that are likely.

Alternative Minimum Tax (AMT)
An alternative, separate tax calculation based on the taxpayer’s regular taxable income, increased by the taxpayer’s preferences for the year. The resulting amount is called the alternative minimum taxable income (AMTI). After certain exemption and offsets, the taxpayer determines its AMT and is required to pay the larger of the regular tax or alternative minimum tax. Among the preferences that can increase the taxpayer’s AMTI is the accelerated portion of depreciation, thereby making it more likely that a taxpayer that buys equipment may be subject to the AMT rather than to regular tax.

Amortization
Loan payments by equal periodic payment calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance.

Amortization Term
The length of time required to amortize the mortgage loan expressed as a number of months. For example, 360 months is the amortization term for a 30-year fixed-rate mortgage.

Annual percentage rate (A.P.R.)
APR is a measurement of the full cost of a loan including interest and loan fees expressed as a yearly percentage rate. All lenders apply the same rules in calculating the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans.

Apartment Conversion
When a rental apartment building is converted to individually owned units.

Apartment Rehabilitation
Extensive remodeling of an older apartment building.

Appraisal
An estimate of the value of property, made by a qualified professional called an “appraiser”.

Appraised Value
An opinion of a property’s fair market value, based on an appraiser’s knowledge, experience, and analysis of the property.

Assessment
A local tax levied against a property for a specific purpose, such as a sewer or street lights.

Asset
Anything owned by a business or individual that has commercial or exchange value.

Assignment
The transfer of a mortgage from one person to another.

Assumability
An assumable mortgage can be transferred from the seller to the new buyer. Generally requires a credit review of the new borrower and lenders may charge a fee for the assumption. If a mortgage contains a due-on-sale clause, it may not be assumed by a new buyer.

Assumption
The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing cost and new, probably higher, market-rate interest charges will apply.

Assumption Fee
The fee paid to a lender (usually by the purchaser of real property) when an assumption takes place.