Add-On Interest to Adult Day Care

Add-On Interest

The interest charges incurred by the principal balance during the term of the loan, regardless of any payments to reduce that principal balance. For example, even though the principal balance is decreased with each monthly payment, the interest charge for that entire year would be based on the original (higher) principal balance at the beginning of the year.

 

Ademption

The testator’s act of disposing of a property that was previously in the will, before the death of the testator, thereby making that portion of the will inapplicable. In other words, ademption refers to the sale or transfer of a property involved in a will — while the owner is still alive.

For example, John Doe creates a will giving his farm to Jane after his death, but then John Doe sells the farm while he is still alive; John Doe has just performed an ademption.

 

Adhesion Contract

A contract that heavily favors the party that created it. For example, most consider mortgage deeds to be adhesion contracts that heavily favor the seller.

 

Adjustable Rate Mortgage (ARM)

A type of mortgage financing that allows the lender to periodically make interest rate adjustments, with consequent payment recalculation. The adjustments are according to an independent market index, such as U.S. Treasury Bill yields or the Federal Reserve’s Cost of Funds Index (COFI). Adjustments are normally made once each period, at the anniversary of the loan.

For example, a 2-year ARM adjusts its interest rates every two years. But there are exceptions, such ARM loans based on the Prime rate, which are adjusted sporadically by major banks, according to movements of the Prime Rate.

 

Adjusted Cost Basis

See the Adjusted Tax Basis entry.

 

Adjusted Gross Income (AGI)

With tax returns, the adjusted gross income is the consumer’s taxable income after all deductions, carry-overs and adjustments have been included.

If you’re a salaried or wage-earning employee, mortgage lenders do not always use this amount for their gross qualifying income calculation. However, if you are a self-employed applicant, mortgage lenders often include the AGI in its qualifying income calculation.

 

Adjusted Sale Price

With appraisal reports that use the comparative market approach, the adjusted sales price is the net value assigned to comparables after adjusting for differences between the subject property and each comparable.

Real estate appraisers estimate a property’s fair market value by looking at nearby comparables that have closed recently. However, no two properties are exactly alike. At the very least, they occupy separate space. With each comparable used, the appraiser starts with the official sales price. But the appraiser must then make positive or negative adjustments to the sale prices based on the differences between the comparable and the subject. After all adjustments have been added or subtracted from the official sales price, the appraiser will then arrive at the adjusted sale price.

For example, the appraiser finds an acceptable comparable that recently sold for $210,000. The two differences it has with the subject property are that the comparable has a detached garage worth about $15,000, but the subject property has finished basement worth $25,000.  The appraiser will adjust the comparable’s value downward by $15,000 for the garage, but upwards for $25,000.  That net positive adjustment of $10,000 arrives at an adjusted sale price of $220,000.

 

Adjusted Tax Basis

Also called adjusted cost basis, this is the net book value of a property; and it’s what you will use to calculate your capital gain or loss.

This calculation begins with the basis (original purchase price) and buying expenses incurred with original purchase. Any capital improvements made since the purchase and buying expenses are added to that original basis. Then all depreciations taken for tax-related deductions are then subtracted from that amount to arrive at the adjusted tax basis. When the property is sold, the capital gains tax is calculated as the new sales price minus the tax basis.

 

Adjustment Interval

On an adjustable rate mortgage (ARM) loan, the adjustment interval is the period between changes in the interest rate and/or monthly payment. The adjustment interval typically ranges from three months to ten years, depending on the specific program selected, with six months and one year being the most prevalent.

Some ARM programs have inconsistent adjustment intervals. This is particularly true for home equity loans and lines of credit based on the Prime Rate.

 

Administered Price System

The Fannie Mae procedure for purchasing securities, in which yields are adjusted every business day to reflect market conditions.

 

Administrator

In real estate, the administrator comes into play when the current owner has died without a will or other provisions to dispose of his or her property. The court appoints an administrator, who will then be responsible for directing and eventually disposing of the property of a person who has died without a will.

Note, however, that when a married spouse dies without a will, that person’s surviving spouse often receives full rights to their home—even if there isn’t a will.

 

Administrator’s Deed

A deed that conveys to a purchaser the real property of an individual who has died intestate (without a will). In other words, it is the type of deed sometimes used to by an administrator to dispose of the real estate of a person who has died without a will (intestate).

 

Adobe

A common type of traditional and pre-modern home building still in use in Latin America and southwestern United States. It traditionally uses sun-dried bricks coated with mud, stucco or clay (which then dries in the sun). Adobe structures require regular maintenance, because the exterior covering must be repaired, patched or resurfaced as the weather erodes it.

 

Adult Day Care

A facility or program that provides social activities, health services and therapy for seniors who face physical, emotional or cognitive impairments.