Financial Literacy is a lifelong process. Whether you’re just starting off, or a seasoned professional, never stop learning. Do not stop seeking to improve. And when you believe you have a good understanding, share it. Seek to impart knowledge on others. Teach them to benefit themselves.Best,
Terms and Definitions
AMORTIZATION: Length of time over which the mortgage will be repaid.
APR – ANNUAL PERCENTAGE RATE: The interest charge that is added monthly to the outstanding balance due on a credit card.
ASSET BASED LENDING: Borrowing funds from a financial institution (not necessarily a bank) with an agreement that is secured by collateral. An asset-based loan or line of credit may be secured by inventory, accounts receivable, equipment, or other property owned by the borrower.
MORTGAGE TERM: Length of time that the mortgage contract conditions and interest rate is fixed.
CLOSING COSTS: Costs in addition to the purchase price of the home that are payable on closing day.
DOWN PAYMENT: The portion of the home price that is not financed by the mortgage loan. It must come from the buyer’s own funds or other eligible sources before securing a mortgage.
EQUITY: The difference between the price for which a home could be sold and the total debts registered against it.
FACTORING: A financial arrangement between the factor and client, in which the firm (client) gets advances in return for payment receivables, from a financial institution (factor) which they purchase at a discounted rate. Payment for the full value of the invoice is then owed to the factoring within the agreed payment terms of that invoice.
FIXED / VARIABLE MORTGAGE INTEREST RATE: A fixed rate is a locked-in rate that will not increase for the term of the mortgage. A variable mortgage interest rate can fluctuate based on market conditions, but the mortgage payment remains unchanged.
HIGH-RATIO MORTGAGE / CONVENTIONAL MORTGAGE: A high ratio mortgage is a mortgage loan higher than 80% of the lending value of the property. A conventional mortgage is a mortgage loan up to a maximum of 80% of the lending value of the property.
INTEREST RATE: The amount a lender charges for the use of assets expressed as a percentage of the principal. The interest rate is typically noted on an annual basis known as the annual percentage rate (APR).
LEASE: A contract by which one party conveys land, property, services, etc. to another for a specified time, usually in return for a periodic payment.
LEVERAGE: Leverage results from using borrowed capital as a funding source when investing to expand the firm’s asset base and generate returns on risk capital. Leverage is an investment strategy of using borrowed money—specifically, the use of various financial instruments or borrowed capital—to increase the potential return of an investment.
OAC (On Approved Credit): is a type of advertising qualifier that indicates a particular financing offer is contingent on the buyer having adequate credit. The measurement of credit is through credit rating, income, and employment factors.
OPEN / CLOSED MORTGAGE: An open mortgage is a flexible mortgage that allows you to pay off your mortgage in part or in full before the end of the term. A closed mortgage, in some cases, cannot be paid off in whole or in part before the end of the term. In other cases, the lender may allow for partial prepayment of a closed mortgage in the form of an increased mortgage payment or a lump sum prepayment.
Create your plan of action with this Debt Pay Off Calculator to see how fast you can crush your debts. Modify the variables and tailor your payment chart to your situation.
Thinking about home ownership? Check out Rate Hub’s Mortgage Affordability Calculator. This resources is packed with information consumer credit related. Combine this with my Monthly Budget Worksheet, free for you, in the downloads section.