The annual percentage rate (APR) is a financial measurement of the cost of credit. Under the Truth in Lending Act, lenders must report it to consumers before they sign up for any credit facilities.
Sometimes also known as nominal APR or effective APR, annual percentage rate is a finance charge expressed as an annualized interest rate.
The purpose of this simplified expression is to help consumers better understand the costs of the credit facilities and loans they are signing up for.
A graduated payment mortgage (GPM) is a type of home loan that is structured with increasing payment amounts for a specified period of time, then reverting to a fully amortizing schedule.
GPMs were one of the best selling mortgages for a period in the 1980s.
It basically targets property buyers whose income were not strong enough to support large loans. So interest rates during the initial years were considerably low.
A home equity line of credit (HELOC) is a mortgage secured with a property structured as a line of credit in which a borrower can draw funds from up to a stated limit.
As opposed to a term loan for a fixed amount of dollars, a HELOC is desirable for people who have no need for funds immediately but foresee a need for funds in the near future without knowing for sure how much will be needed.
This set up helps the borrower save on interest costs when the facility is not used.
The interest rate adjustment period refers to the number of times, or how often, interest rates on an ARM is adjusted after the initial rate period.
For example, a 3/1 ARM refers to a mortgage with an initial rate period of 3 years and an interest rate adjustment period of once every 1 year.
For hybrid ARMs, the initial years consist of fixed rates. And converts to a regular ARM after the initial period.