Fundamental Personal Finance Terminology

4 Jul

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Searching by way of glossaries and chapters of finance book pages can be frustrating if you are hunting for a speedy reference or definition to a prevalent personal finance term. To be confident, the economic globe has sufficient jargon to make even a lawyer’s head spin. Terms like adjustable rate, amortization, appreciation, balloon mortgage, phrase loan, fixed rate, net revenue and much more all spin about in your head and trigger a headache for many individuals and households just trying to get ahead in the game of life.

To make matters worse, economic ebooks can make the net of words even far more cluttered up and confusing. There are some books that offer you practical ideas and suggestions on how to get loans, locate the finest deal for huge purchases such as vehicles and houses, put away the appropriate amount of saving and pay off debt, keep out of bankruptcy and far more. These books on finance can be a hit or miss occasionally due to the fact each individual’s financial predicament is distinct. There are so numerous variables from credit scores to debt to earnings ratio, economy, collateral, income, expenses and the list goes on. No single book can cover the financial repair it all for each and every particular person but there are some books that get the ball rolling in the right course. The finest place to start is to realize what all those books are even speaking about.

The common particular person ought to know the which means of these terms so that he or she could make the most informed selection and a single that will benefit them the most. To begin, you need to know the distinction among fixed prices and adjustable prices. Ebooks economic guidance will point out the pros and cons of every single rate. Adjustable rate loans have a fluctuating interest rate that frequently uses an underlying variable and may possibly include a cap on frequency and greatest interest increases. Fixed rate loans hold the exact same interest rate throughout the life of the loan. An adjustable rate might appear far more appealing in the starting due to the fact the interest rate may be lower than a fixed rate however, you are taking somewhat of a gamble with the adjustable rate. Most people who take an adjustable rate plan on refinancing the loan within a couple of years, as a fluctuating interest rate is not best for lengthy term loans such as 30 year mortgages.

Other prevalent words that are broadly unknown are all the guidelines and guidelines and terms and conditions on the back of those credit card statements. Finance ebooks can support you shed some light on all that compound interest jargon and could also offer you a handful of guidelines that support you safe far better credit card provides. It is critical that you educate your self on the terms and conditions of your lines of credit, no matter what the supply. This can assist you keep away from a costly mistake.

There are oodles of mortgage and loan terms that every single references a certain interest calculation, lifespan, clause or phrase within the loan. The finest guidance to take is to know exactly what the terms of any loan you take out are and to recognize the meanings of all that jargon. By knowing and educating oneself about the economic planet ahead of time, you will be capable to shop around and discover the greatest deals in the market place for your circumstance.

25 Responses to “Fundamental Personal Finance Terminology”

  1. Kymberly January 19, 2013 at 9:07 am #

    Say someone would have an Arm, kept in for ten years (of the thirty year mortgage) in an rate of %5.125, what goes on after ten years? What exactly are your choices? I am unsure the salt water evaporates. Any help could be appreciated. Thanks!!!

  2. Callie January 20, 2013 at 7:13 pm #

    Many Fannie Mae adjustable rate financial loans made presently with stimulus dollars permit the rate to improve by 5%. This potentially could double the amount payment in the first adjustment, typically on month 61. What exactly are your plans to limit these toxic financial loans? Are you going to consider restricting Fannie Mae to fixed interest rate financial loans while citizens are subsiding the company?

  3. Leida January 20, 2013 at 9:05 pm #

    I understand that whenever the bubble burst housing prices rejected and rates of interest increased. Individuals with sub prime and arms began to default at high rates which triggered the crisis. What I’m not sure is the reason why the bubble burst. Apparently housing prices have been continuously rising since WW2. How did the housing industry loose its strength out of the blue? Anybody know?

  4. Teofila January 20, 2013 at 10:11 pm #

    I’m wondering, with the problems banks have over foreclosures documents along with other mistakes, is it feasible that my bank designed a mistake using the variable rate of interest on my small ARM loan? Wouldso would I understand? What is the website that delivers an amortization schedule of the ARM loan or that audits arms for rate of interest errors? My mortgage note is simply too complicated that i can do that by myself!

    My ARM rate of interest went as much as over 11% and lower as little as 6%, so I am worried that something may be wrong with your a sizable change with time.

  5. Myong January 25, 2013 at 7:17 pm #

    I’m while obtaining a loan for any house. I don’t intend to market it.Around the paperwork I see checked “the loan does have a variable rate feature. discloures concerning the variable rate feature happen to be presented to you earlier.” It included a guide on arms. no where else within the paperwork will it discuss a ARM. It’s quantity of obligations for example 24 @ 1,224.30 then 335 @ 1,249.77 and 1 @ 1,246.11.

    Same with the variable just meaning a general change in obligations in the above list or that my rate of interest and obligations can alter other then what’s listed?

    I specificaly said excitedly I needed a set rate.

  6. Jenell February 20, 2013 at 3:13 am #

    My sister currenty has an adjustable rate and her monthly mortgage payments have risen to $2100 a month. She is currently seeking an apartment. Is there any way she can refinance her home and obtain a fixed rate or is she doomed?
    Her credit is poor. We went to look for apartments yesterday and each time she was told she would need a co-signer. Apparenty, she has been making her mortgage payments late…

    She thought about filing for bankruptcy, but was told it would NOT help her when it comes to her mortgage payments…

  7. Adam March 22, 2013 at 1:51 am #

    The problem is that 2yrs ago I made the mistake of getting a loan for my sister who did not have any credit. She wasn’t able to pay the mortgage and now the house is under forclosure. The adjustable rate increase is on a condominium that I am leasing out, not on the house that is under foreclosure I have always kept up with my payments and was unaware of my sisters defult on the mortgage until recently. My question is: Is there anyway that I can stop or atleast postpone this increase eventhough I am in forclosure status on another property? I can’t afford this increase right now, I am only 24yrs old in college and don’t have any savings to help me out thru this dilema. Any advice would be sooooo greatly appreciated.

  8. Suellen March 27, 2013 at 11:56 pm #

    My adjustable rate has gone up this month and will go up again in 6 months.

    Will I be able to get a fixted rate with credit scores between 680 and 720.

    How do I go about it and will I have to have my home apraised? I bought the house for 160000.00 and now owe about 130000.00 on it. How much will they refinace, all of it or only 80%.

    The rate is going to kill me.

  9. Elouise March 29, 2013 at 10:16 am #

    Being that it is a new year one of my resolutions was to do more research before a jumped into anything. Being that I’m new to the housing market what are the benefits of a fixed rate mortgage compared to an adjustable rate?

  10. Darnell March 30, 2013 at 4:30 pm #

    The Fed cut its federal funds rate three-quarters of a percentage point, and it also cut the discount rate three-quarters of a percentage point.
    What does this all mean to a person such as myself with an ajustable mortage rate??
    Do these cuts affect homeowners that have adjustable rates in terms of lowering monthly payments??

  11. Jaime March 30, 2013 at 4:30 pm #

    I want to do a 10/1 30 year adjustable rate mortgage. It is my understanding that the rate will remain the same for the 1st 10 years then adjust. Is this accurate, or can my rate change before the 10 years and if my rate remains the same, does that mean that my monthly payment will remain the same for 10 years, aside from tax and PMI increases?

  12. Youlanda April 5, 2013 at 8:07 am #

    Savings Institution bears less interest rate risk if they lend money at fixed-rate, but some institutions prefers adjustable-rate, why?
    What if the market has upward-sloping yield curve? What are the reasons that Savings Institutions want to lend money at fixed-rate?

  13. Chana April 5, 2013 at 2:55 pm #


    My husband and I bought our home 2 years ago on with an adjustable rate mortgage. The interest rate has now come up and we need to refinance.

    The problem is that our credit score is about 600.

    Can we get a refinance? Our home is worth about $240K, we have $25K in debt, and we make about $140K per year.
    Thanks Bob,

    But we really can’t afford the extra costs. Our payment went from $1100 per month to $1680 per month.

    What would the rate be for a credit score of 600?

  14. Silvia April 8, 2013 at 5:35 am #

    My husband and I are interested in buying a mobile home on a fixed foundation, but every bank we’ve talked to said we cannot get a fixed rate, but an adjustable rate mortgage. Is there any other options so that we can get a fixed rate? Is there specific lenders that do this type of thing?

  15. Ned April 8, 2013 at 9:04 am #

    It seems that the people that purchased their homes with Adjustable Rate Mortgages got into big trouble when their rates adjusted at a higher rate. Did they not see this coming since they did opt for a Adjustable Rate Mortgages vs a Fixed Rate Mortgage.

    Also do people with Fixed Rate Mortgages having the same problem as Adjustable Rate Mortgages home owners? I would assume not, usless they lost their job.

  16. Donovan April 8, 2013 at 10:56 am #

    I have an adjustable rate mortgage and I want to calculate how much left I will have to pay at varying years. I am using excel to calculate it using this formula: pv=pmt*((1/rate)-(1/(rate*(1+rate)^time)))
    but it only works on non-arms.

  17. Teofila April 9, 2013 at 5:09 am #

    i just refinanced my home the original value was 45k and i had it paid down to 35k. when i refinanced it brought the value i need to pay back up to 51k. i have a adjustable rate now that will kick in may of 09 my percent is 12.750 i think. i pay 500 a month now for the mortgage and 720 total with all the taxes and stuff. i dont have a penalty for paying the loan of early so i want to pay it off in the next five years but with the arm my percent can go as high as 18.750. i dont want the bank to take my house from me because of the mistake i made by refinancing in the first place. so is it possible to refinance into a fixed rate and still keep the loan at 50k and still pay it of early with out any penalty. this is my first post so plz any and all help is great

  18. Leif April 11, 2013 at 1:11 pm #

    In the sub-prime mortgage crisis, why did the banks increase interests rates on adjustable rate mortgages? Did anyone predict what would happen if they did this?
    Do not say greed or another emotion or mythology, including God, the Devil or fate.
    Do not say greed or another emotion or mythology, including God, the Devil or fate.

  19. Breana April 11, 2013 at 5:08 pm #

    Which is better of the two, fixed-rate mortgages or adjustable-rate mortgages?

  20. Jesenia April 12, 2013 at 10:46 am #

    remember the period of 2003 people got their fix rate mortgages from their adjustable rate mortgages…and wanted to know how common it is for some during this period got fix rate mortgages which were for only a specific length of time ??

    why would anyone only get a low fixed rate for a specific length of time??

    what are the advantages?

    Thanks for your answers!

  21. Cruz April 16, 2013 at 12:45 pm #

    Company XYZ originally estimated the cost of debt to be 5.75%, which is the rate at which they can borrow for a project in the fixed rate debt market. Alternatively, they could borrow at a floating (adjustable) rate of LIBOR+0.1%. XYZ has identified Company ABC as a possible counter party for an interest rate swap. ABC can borrow at a fixed rate of 5.95% and a floating rate of LIBOR+0.6%. The swap benefit will be divided equally between the parties.

  22. Hans May 7, 2013 at 9:48 am #

    Adjustable rate mortgage is adjusting every 6 months. We had hoped to sell before the 2 yr period but health problems have prevented us from moving. Need to refinance and buy some time to hopefully sell but credit is poor due to health ongoing health problems past 2 years. Any suggestions?

  23. Arthur August 15, 2013 at 8:37 am #

    we have asked for a modification of our mortgage, we are in an adjustable rate @ 7.25 the bank came back with 3.25 with a fixed until 2012 can it be changed to the life of the loan?

  24. Kellee August 16, 2013 at 8:44 am #

    I say we should do the following. Anyone buying a house should have to come up with a 20% down payment from their own savings. They would have to prove a steady work history and prove that the total loan payment, including taxes and insurance is no more than 30% of their regular take home pay. Any adjustable rate mrtgages should be banned. Only fixed rate mortgages should be permitted. This would prevent foolish borrowers from hurting all the rest of us again.

  25. Cristobal August 22, 2013 at 9:30 pm #

    I just read that foreclosures are up 78% in my state, and a lot of them were because people could not afford to pay on their skyrocketing adjustable rate mortgage. I have never bought a home before, but I would like to know why anyone would choose such a mortgage. Are fixed rate mortgages so much harder to obtain?

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