Resource Center Banking Terms
AGI - Adjusted Gross Income
The amount used in the calculation of an individual's income tax liability; one's income after certain adjustments are made, but before standardized and itemized deductions and personal exemptions are made.
The payment of a debt in installments over an agreed-upon period, during which principal and interest are paid off.
APR - Annual Percentage Rate
The annual cost of a mortgage, including interest, mortgage insurance, and the origination fee (points), expressed as a percentage.
APY - Annual Percentage Yield
A percentage rate reflecting the total amount of interest paid on a deposit account (checking, savings, CDs, IRAs), based on the interest rate and the effect of interest compounding for one year.
ARM - Adjustable Rate Mortgage
A mortgage in which the interest rate is adjusted periodically according to the pre-selected index.
Personal possessions of value, including cash, real estate and investments.
ATM A machine which enables a customer to perform basic banking activities (e.g., checking your balance, withdrawing or transferring funds, etc.) Typically available 24 hours a day.
A card which lets you withdraw your money from ATMs.
Automated Clearing House (ACH)
A nationwide electronic funds transfer network that enables participating financial institutions to distribute electonic credit and debit entires to bank accounts and to settle such entries.
Automated Teller Machine (ATM)
Commonly called an ATM, it's a terminal activated by a magnetically encoded card that allows customers of a bank or other financial institution to conduct certain transactions such as deposits and withdrawals. An interconnection of these terminals allows customers to conduct certain transactions around the nation and the world, usually subject to a surcharge fee.
An arrangement that moves money at certain specified times, often monthly, from an interest-bearing or savings account into a non-interest, usually checking, account for the payment of checks or other drafts.
Short for Web browser, a software application used to locate and display Web pages. The two most popular browsers are Microsoft Internet Explorer and Netscape Navigator. Both of these are graphical browsers, which means that they can display graphics as well as text.
A maximum rate that a mortgage cannot go above for a set period of time.
A check drawn on and issued by a bank. It does not usually bounce because the face amount is paid to the bank when it is issued and the bank then assumes the obligation.
Certificate of Deposit (CD)
A time deposit that is payable at the end of the specified term. CDs generally pay a fixed interst rate and gernally offer a higher interest rate than other types of deposit accounts. Terms can range from 7 days to 10 years. If a withdrawal from the CD prior to the end of the term is permitted, a penalty is usually assessed.
Personal property that can be moved.
Property (real, personal or otherwise) pledged as security for a loan. Also, any supplementary promise of payment, such as a guarantee.
A person who signs a promissory note that is also signed by one or more other parties. All parties take responsibility for the debt if any of the others renege.
An agency which collects information about the creditworthiness of individuals.
Credit life insurance
A type of life insurance that helps repay the loan if the consumer becomes disabled. It is optional coverage. When taken out, the cost of the policy is sometimes rolled into the loan principal amount.
The maximum amount of charges a card holder may apply to the account. The Consumer Federation of America suggests people carry credit lines no greater than 20 percent of their gross household income. For example, people with a gross income of $50,000 would cap credit lines at $10,000.
A judgment of someone''s ability to repay debts, based on current and projected income and history of payment of past debts. Sometimes expressed as a number called a credit score.
Credit Rating / Scoring A ranking (based on detailed financial analysis by a credit bureau) of one's financial history, specifically as it relates to their ability to meet debt obligations. Lenders use this information to decide whether to approve a loan.
Card that lets you access your money from an ATM or make purchases at merchants that accept Visa. The amount of purchase is withdrawn from your checking account as if you had written a check.
The amount of money a person has in outstanding debt, compared to the amount of credit available on all of the individual''s credit cards and credit lines. The higher a person''s debt to available credit, the more risky the individual appears to potential lenders.
The percentage of before-tax earnings that are spent to pay off loans for obligations such as auto loans, student loans and credit card balances. Lenders look at two ratios. The front-end ratio is the percentage of monthly before-tax earnings that are spent on house payments (including principal, interest, taxes and insurance). In the back-end ratio, the borrower''s other debts are factored in.
A sum a borrower pays to a lender to decrease the interest rate of a mortgage. A point equals 1 percent of the loan amount.
Electronic Funds Transfer
Any transfer of funds initiated by electronic means, such as an electronic terminal, telephone, computer, ATM or magnetic tape.
The conversion of data into a secret code and used to provide security in the transmission of data. Nationwide requires devices to support 128 bit encryption to access Internet Banking.
The difference between the value of the Mortgaged Property and the total dollar amount of all Mortgages and other liens secured by the Mortgage Property.
Escrow includes all funds collected to cover expenses to be paid under the Mortgage including, but not limited to taxes, special assessments, ground rents and other charges that are or may become first liens on the Mortgaged Property, as well as property insurance premiums and mortgage insurance premiums.
A written report which quantitatively describes the financial health of a company. This includes an income statement and a balance sheet, and often also includes a cash flow statement. Financial statements are usually compiled on a quarterly and annual basis.
Fixed interest rate
An interest rate that's fixed for a length of time: it will not go up or down - even if the variable mortgage rate does.
The total amount before anything is deducted.
An acronym for home equity line of credit.
IRA - Individual Retirement Account
A tax-deferred retirement account for an individual that permits them to set aside up to $2,000 per year, with earnings tax-deferred until withdrawals begin at age 59 1/2 or later (or earlier, with a 10% penalty).
Internet Service Provider, a company that provides access to the Internet. For a monthly fee or free, the service provider gives you a software package, username, password and access phone number.
Staggering deposits into investments such as CDs in order to vary and better the rate of return.
A financial obligation, claim, debt, or potential loss.
Line of Credit
An agreement negotiated between a borrower and a lender establishing the maximum amount of money a borrower may draw. The agreement also sets out other conditions, e.g., how and when money is to be repaid.
Loan to Value The loan amount divided by the lesser of appraised value or purchase price.
A financial instrument, issued by a bank or other institution, allowing the individual named on the order to receive a specified amount of cash on demand. Often used by people who do not have checking accounts.
Mortgagee An institution that gives someone a mortgage (i.e., the building society).
Someone who takes out a mortgage (i.e., the borrower).
Net The amount remaining after certain adjustments have been made for debts, expenses or deductions.
A situation in which a check (or other type of withdrawal) may not be paid because the balance in the account is less than the check amount.
Payment that is deposited at the same financial institution on which it was drawn or written, e.g., a cheque that was written by one customer of a bank and deposited by the recipient at another branch of the same bank, or a withdrawal that is made by a customer at his or her own financial institution. These items are not cleared between institutions and therefore are generally not represented in statistics of payments exchanged between financial institutions in the clearings.
A Mortgage loan, usually covering development costs, interim loans, construction loans, financing expenses, marketing administration, legal and other costs. The loan differs from the construction loan in that the financing goes into place after the project is constructed and open for occupancy.
Acronym for the elements of a mortgage payment: principal, interest, taxes and insurance.
PMI - Private Mortgage Insurance
Insurance written by a private company protecting the mortgage lender against loss occasioned by a mortgage default. Required on all loans with a LTV in excess of 80%.
Point-of-Sale An electronic payment system for retail goods and services, through the use of credit cards or debit cards that directly access and deduct funds from a customer’s checking account. Also known as POS.
Prepaid interest, prepaid real estate taxes and Escrows, initial mortgage insurance premium, hazard insurance premiums, and Escrows associated with a Mortgage transaction.
The repayment of a debt from the proceeds of a new loan using the same property as security.
The cancellation or annulment of a transaction or contract by the operation of mutual consent. Refinances require a 3-day rescission period after closing.
A new type of IRA, established in the Taxpayer Relief Act of 1997, which allows taxpayers, subject to certain income limits, to save for retirement while allowing the savings to grow tax-free. Taxes are paid on contributions, but withdrawals, subject to certain rules, are not taxed at all.
SSL - Secure Socket Layer
An encryption method for secure data transfer.
Income or other earnings that are not now, but will eventually be, subject to taxation. For example, some retirement plan earnings may be taxed when the owner takes distributions.
Tiered interest rates
The interest rate you receive depends on the balance in your account. When the balance goes beyond a certain level, your entire balance automatically earns interest at the higher rate. Alternatively, if a withdrawal takes your balance below a certain level, your entire balance earns interest at the lower rate.
The legal right to ownership of a property.
Documents showing who owns a property.
The analysis of risk and the matching of it to an appropriate rate and term.
Uniform Resource Locator, the global address of documents and other resources on the World Wide Web, e.g. www.borderstatebank.com
Variable interest rate
An interest rate, which can go up or down in line with general interest rates.
Purchase document, which transfers ownership from the seller to the buyer.