**One-year adjustable**

Mortgage whose annual rate changes yearly. The rate is usually based on movements of a published index plus a specified margin, chosen by the lender.

**Lock**

Lender's guarantee that the mortgage rate quoted will be good for a specific number of days from day of application.

**Index**

A floating index lenders use to calculate the rate on a one-year adjustable-rate mortgage. The most common indexes are the one-year Treasury Constant Maturity Yield and the FHLB 11th District Cost of Funds.

**Caps**

The maximum amount the mortgage rate can change annually or over the life of the loan on a one-year adjustable. For example, if the caps are 2% annual and 6% life of loan, a mortgage whose first-year rate is 10% could rise to no more than 12% the second year and 16% over the entire loan term.

**Margin**

The number of percentage points added to the index on a one-year adjustable. For example, if the index rate is 9% and the margin is 3%, then the fully-indexed rate is 12%.

**Points**

A percentage of the loan amount, paid at closing. Each point is one-hundredth of the loan amount.

**Indexed rate**

The sum of the published index plus the margin. For example if the index were 9% and the margin 2.75%, the indexed rate would be 11.75%. Often, lenders charge less than the indexed rate the first year of an adjustable-rate mortgage.

**Annual Percentage Rate (APR)**

Interest rate reflecting the first-year rate including certain points and credit costs.

**COFI**

Adjustable-rate mortgage with rate that adjusts based on a cost-of-funds index, often the 11th District Cost of Funds.

**Buydowns**

Mortgage in which the rate is offset by paying more points up front.

**7/23 and 5/25 Mortgages**

Mortgages with a onetime rate adjustment after seven years and five years respectively.

**3/1, 5/1, 7/1 and 10/1 ARMs**

Adjustable-rate mortgages in which rate is fixed for three-year, five-year, seven-year and 10-year periods, respectively, but may adjust annually after that.

**Balloon**

Loan in which little, if any, of your monthly payments go toward paying off the outstanding balance. Rather, one large, lump-sum payment is due at maturity.

**Jumbo Mortgages**

Mortgages that go over the $207,000 Fannie Mae and Freddie Mac limit.

**Loan-to-Value Ratio**

Proportion of a home's value upon which an institution will issue a loan.

**Negative Amortization**

When interest rates increase faster than monthly payments, on an adjustable-rate mortgage, your balance may grow despite efforts to pay it down.