Glossary

25 financial, real estate, retirement, and technology terms used across the calculators on this site.

Amortization: The process by which a loan balance is paid down over time through scheduled payments that cover both interest and principal. In the early years of a mortgage, the majority of each payment goes to interest; in the later years, the majority goes to principal.
APR (Annual Percentage Rate): The annual cost of borrowing, expressed as a percentage, that includes both the interest rate and most loan fees. APR is always equal to or higher than the stated interest rate and is the more accurate number for comparing two loan offers.
APY (Annual Percentage Yield): The effective annual return on a savings or investment account that accounts for compounding. APY is always equal to or higher than the stated interest rate and is the right number to compare when shopping for savings accounts or certificates of deposit.
Basis Points (bps): A unit equal to one one-hundredth of a percent. 100 basis points equals 1 percent. Used to describe small changes in interest rates so that '0.25 percent' is unambiguously written as '25 basis points.'
Break-Even Point: The point in time at which the cumulative savings from a financial decision (such as a refinance or a solar installation) equal the upfront cost. Decisions that do not reach break-even within a reasonable horizon usually do not pay off.
Cap Rate (Capitalization Rate): In commercial real estate, the ratio of a property's net operating income to its purchase price, expressed as a percentage. A higher cap rate generally indicates higher yield but also higher perceived risk.
Coast FIRE: The savings balance at which existing retirement assets, left untouched and allowed to compound, will grow into a full retirement nest egg by the chosen retirement age — without any further contributions.
Compound Interest: Interest that is calculated on the original principal plus all previously accumulated interest. Compounding is the mechanism by which long-term investments grow exponentially rather than linearly.
Debt-to-Income Ratio (DTI): Total monthly debt payments divided by gross monthly income, expressed as a percentage. Mortgage lenders use DTI as a primary qualification metric, with most preferring a total DTI under 43 percent.
Equity (Home): The portion of a home's value owned outright, calculated as the current market value minus the outstanding mortgage balance. Home equity grows through principal paydown and through appreciation.
Escrow: A neutral third-party account that holds funds until specific conditions are met. In mortgage lending, the escrow account holds property tax and insurance payments collected monthly by the lender and disbursed on the homeowner's behalf.
FIRE (Financial Independence, Retire Early): A movement and methodology focused on saving a high percentage of income — often 40 to 70 percent — to reach the point where investment income can fully replace earned income, typically before the traditional retirement age.
HELOC (Home Equity Line of Credit): A revolving line of credit secured by the equity in a home. HELOCs typically have a variable interest rate, a draw period during which only interest is required, and a repayment period during which the balance must be paid down.
Loan-to-Value Ratio (LTV): The outstanding loan balance divided by the appraised value of the underlying asset, expressed as a percentage. An LTV above 80 percent on a home loan usually requires private mortgage insurance.
Minimum Payment: The smallest amount a credit card issuer will accept on a given billing cycle, typically calculated as a small percentage of the balance plus accrued interest and fees. Paying only the minimum extends payoff time and total interest dramatically.
Net Operating Income (NOI): In commercial real estate, the income produced by a property after operating expenses but before debt service and income taxes. NOI is the numerator in the cap rate calculation.
Origination Fee: A fee charged by a lender to process a new loan, usually expressed as a percentage of the loan amount (typically 0.5 to 1 percent on a mortgage). Included in APR but not in the stated interest rate.
Points (Mortgage): Upfront fees paid to a mortgage lender in exchange for a lower interest rate. One point equals 1 percent of the loan amount and typically reduces the rate by 0.25 percent, though the trade varies by lender.
Principal: The original amount borrowed on a loan, or the portion of a current balance that is not interest. Each loan payment reduces principal by the difference between the payment amount and the interest charge for that period.
Provisional Income: The IRS calculation used to determine how much of a Social Security benefit is taxable. Equals adjusted gross income plus tax-exempt interest plus half of Social Security benefits.
Refinance: Replacing an existing loan with a new loan, usually to obtain a lower interest rate, change the term, or pull out equity. Carries upfront closing costs that must be recovered through future savings.
SOFR (Secured Overnight Financing Rate): A benchmark interest rate that replaced LIBOR as the reference rate for many variable-rate loans in the United States. SOFR is published daily by the Federal Reserve Bank of New York.
Spot Price: The current market price at which a commodity (such as gold or oil) can be bought or sold for immediate delivery. Retail buyers almost always pay a premium above spot due to dealer markup and physical handling costs.
Token (LLM): The smallest unit of text an AI language model processes. Roughly three-quarters of an English word per token. LLM API pricing is denominated in dollars per million tokens of input and output.
Wash Sale: An IRS rule that disallows a tax loss when a sold security is repurchased — by the taxpayer or their spouse, in any account including IRAs — within 30 days before or after the sale. The disallowed loss is added to the cost basis of the replacement shares.