If loans have adjustable rates

Interest rate floor:
The minimum interest rate that can be charged on an adjustable interest rate loan during the term of the loan.

Anniversary date:
The periodic date, usually once a year, that the interest rate is reset on an adjustable-rate mortgage.

Lifetime cap:
A lifetime cap is the limit to how much the interest rate on an adjustable-rate loan can be increased over the term of the loan.

Private mortgage insurance (PMI):
An insurance policy that protects lenders against loss if a borrower defaults. Typically required if the loan-to-value (LTV) ratio of the home exceeds 80%.

Interest rate:
The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of money.

Property insurance:
Protects the homeowner from weather-related damage, as well as potential liability from events that occur on the property.

Yield:
The annual income provided by a fund, share or bond expressed as a percentage. Yield is normally calculated by dividing the current price of the asset by the income. For example, the yield on a bond that sells for $1,000 and has a coupon rate of 8% is 8%. If the bond price rises to $1,050, the yield falls to 7.62%. If the price drops to $950, the current yield rises to 8.42%. Redemption yield is the interest rate that you are getting if you buy a bond at the current price and hold it until redemption.

Index rate:
An index rate is a widely used, benchmark interest rate that lenders use to set the interest rate on loans and credit cards.

Term:
The period of a loan, generally measured in years. Auto loans generally range from 2 to 5 years. Mortgage loans: 15 to 30 years.

Adjustable-rate mortgage (ARM):
A type of mortgage loan in which the interest rate paid on the outstanding balance varies according to a specific benchmark.

Property tax:
A tax assessed on real estate by the local government, usually based on the value of the property (including the land) you own.

Property Taxes and Homeowner's Insurance:
A typical monthly mortgage payment consists of amounts for loan principal, interest, property taxes, and homeowner's insurance.

Charge for specific interest rate:
An additional charge, expressed as a percentage of the loan amount, to obtain a lower interest rate.

Effective interest rate:
Your true interest-rate cost of borrowing stated as an annual rate. It loan includes compounded interest, fees, points and other closing costs.

Margin:
The fixed amount a lender adds to the base rate of an adjustable-rate mortgage to set the loan rate.

Periodic rate cap:
The periodic interest rate cap is the maximum amount the loan rate can change on an adjustable-rate mortgage loan on the anniversary date. ARM loan rates are often reset once a year after an initial period. A lifetime cap often exists. A lifetime cap limits the maximum loan rate that can be charged.

Cost-benefit analysis:
An analysis of the cost effectiveness of different alternatives in order to see whether the benefits outweigh the costs.

Savings interest rate:
The yearly interest rate you earn on your savings.

Treasury bills (T-bills):
U.S. Treasury bills are short-term debt obligations of the U.S. Treasury. T-bills are usually issued to mature in three or six months. Prices for T-bills are stated as a discount to the par value. For example, a T-bill with a price of 99.65 is selling for 99.65% of its par value. T-bills are auctioned weekly and used to pay operations of the federal government. T-bills are considered to be among the safest and most liquid investments.

Spread:
The arithmetic difference between two interest rates, usually stated in basis points. One percentage point consists of 100 basis points.

Months between rate adjustments:
The frequency at which interest rate changes or resets on an adjustable-rate mortgage occur.

Adjustment period:
The initial fixed-interest-rate period on an adjustable rate mortgage loan. For example, a 5-year ARM would have an adjustment period of 60 months.

Tax rates:
The percentage of your taxable income that is owed to the state and federal governments. The tax rate increases as the taxable base amount increases.

Origination Charges:
The sum of all fees and charges from origination-related services. This represents all compensation to the lender and/or broker for originating the loan.

Other settlement services:
Fees paid for services associated with the purchase of a home that do not represent compensation to the lender and/or the broker for originating the loan.

P+I:
An acronym for the principal and interest that you pay on a mortgage loan.

Origination fee:
A lender may charge an origination fee that is additional to any mortgage points you pay. Origination fees are the lender's charge for funding your mortgage with a mortgage broker. The process of funding your loan is called origination.

Present value:
The value of a future payment, or series of payments, discounted at the appropriate interest rate to determine the value in today's dollars.

Interest rate cap:
The maximum interest rate that can be charged on an adjustable interest rate loan during the term of the loan.