• schoolAcceleration clause
    An acceleration clause is a condition in a mortgage that allows the lender to require the entire principal balance of the debt to be immediately due when a borrower violates the loan agreement.
  • schoolAdjustable rate mortgage (ARM)
    An adjustable rate mortgage (ARM) is a loan whereby the interest rate may fluctuate during the life of the loan. With ARM interest rates, the initial rate may be fixed for a period of time, and then the interest rate may increase or decrease according to a formula based on a pre-determined index coupled with a set margin. Typically, an index may be the one-year U.S. Treasury bill, or the London Interbank Offered Rate (LIBOR).
  • schoolBalloon mortgage
    A balloon mortgage is a type of loan wherein the borrower is accountable for paying the outstanding principal amount due at the final date of maturity. Balloon Mortgages are typically interest only loans wherein monthly payments do not include the amortization of loan principal.
  • schoolBlanket mortgage
    A blanket mortgage is a type of loan that is used whereby there is more than one piece of collateral being pledged by the borrower.
  • schoolBridge loan
    Bridge loans provide short term loans to finance borrowers who are looking to meet present liabilities. Bridge loans typically have higher interest rates and shorter loan terms.
  • schoolCapitalization rate
    Capitalization rate, also known as cap rate, is the expected return each year from the net income of a property expressed in percentage terms. It is typically the ratio of Net Operating Income (“NOI”) to the all in purchase price. For example, if an investment property costs $1 million and it generates $85,000 of NOI a year, this property would be producing a return equal to an 8.5% cap rate.
  • schoolCertificate of occupancy
    A certificate of occupancy is delivered by a local government agency certifying the building’s structure is satisfactory and follows building codes and other laws. The CO indicates that the structure can be occupied.
  • schoolCollateral
    Collateral is an asset pledged by the borrower to the lender in return for a loan. The lien in the Collateral helps protect the lender in the event of a default.
  • schoolCommercial property
    Commercial properties are assets that typically produce income and are not 1-4 unit residential dwellings. Example of commercial properties include, but are not limited to, parking lots, malls, hotels, and office buildings.
  • schoolConstruction loan
    A construction loan is a short-term loan, secured by a mortgage, that covers the costs of building a property.
  • schoolDebt service
    Debt service is the periodic payment by the borrower of the interest and principal due from a loan.
  • schoolDeed
    A deed is a written document that transfers property ownership between two parties.
  • schoolDeed in lieu of foreclosure
    A deed in lieu of foreclosure, also known as a friendly foreclosure, is a procedure whereby the property owner willingly conveys title to the lender in order to prevent a foreclosure.
  • schoolDefault
    A default occurs when a borrower fails to follow the obligations agreed upon in a loan transaction between borrower and lender.
  • schoolEasement
    An easement is a legal right to use another person’s land for a specific reason.
  • schoolEncumbrance
    An encumbrance is a claim, lien, or limitation attached to a property. An encumbrance can hinder the owner’s capacity to transfer title to the property.
  • schoolEquity
    Equity is the ownership value of an asset after any liabilities associated have been eliminated.
  • schoolEscrow account
    An escrow account is an account with the sole purpose of holding or setting aside funds temporarily. An escrow account transaction typically has specific terms associated with it that spell out how funds are released and delivered from an escrow account.
  • schoolFirst mortgage
    First mortgages are senior debt. In most cases these loans have precedence to be paid back in the event of a default over later recorded liabilities.
  • schoolFixed-rate mortgage
    A mortgage with a fixed rate of interest throughout the entire term of the loan.
  • schoolForbearance
    A forbearance is a document agreed upon between a lender and borrower that permits a borrower to temporarily delay making the scheduled payments and to take other actions in lieu of the lender taking immediate foreclosure action.
  • schoolForeclosure
    A foreclosure is the legal procedure to enforce the rights of the lender as detailed in the loan documents.
  • schoolIncome approach
    ncome approach is used to value properties based on the income the property generates.
  • schoolIncome property
    A property that generates income through renting or leasing. An income property can either be a commercial property or a non-owner-occupied residential property.
  • schoolInterest
    Interest is a proportion of a loan balance that is periodically paid to the lender in return for the risk associated for borrowing their money.
  • schoolLessee
    A tenant or a person who obtains a lease from another entity’s property.
  • schoolLessor
    A landlord or a person who leases out a property to another person
  • schoolLeverage
    Leverage is the utilization of borrowed funds; typically used to boost the return on equity of the investment.
  • schoolLis pendens
    Lis pendens is the Latin translation for lawsuit pending. It is the formal notice that begins the foreclosure process.
  • schoolLoan-to-value ratio (LTV)
    The LTV is the ratio of the loan amount to the estimated value of the asset.
  • schoolMarket value
    Market value is the property’s current value. It is typically the estimated current transaction price of the asset, assuming the transaction were taking place between two willing parties
  • schoolMortgage
    A written document that records the pledge of ownership in real estate to secure a loan.
  • schoolMortgage principal
    Mortgage principal is the outstanding balance of a mortgage and on which interest is computed.
  • schoolMortgage satisfaction
    A mortgage satisfaction occurs when a borrower has paid to the lender all monies owed under a loan agreement.
  • schoolNet lease
    A contractual agreement whereby the tenant pays for rent as well as a portion or all the taxes, insurance, and maintenance of a property
  • schoolPlat
    A plat is a property map recorded in the public record which indicates the location, boundaries of land parcels, streets, and easements of the area.
  • schoolPrepayment penalty clause
    A penalty for satisfying a mortgage before a predetermined date.
  • schoolPrincipal residence
    A principal residence is an individual’s primary home for tax purposes and regulatory purposes.
  • schoolPromissory note
    A promissory note, also called a note payable, is a written promise that the borrower will pay their debt per the terms of their promise to the lender.
  • schoolSales comparison approach
    Real Estate valuation method that compares recently sold properties to the subject property in order to find a reasonable value for the asset.
  • schoolSatisfaction of mortgage
    Satisfaction of mortgage is a document that is typically recorded and releases the mortgage lien, indicating that the loan has been fully re-paid.
  • schoolSecond mortgage
    A second mortgage is a lien on the property that is subordinate to the senior loan (first mortgage). If a loan defaults, then the second mortgage will only get paid if the first mortgage is paid in full. The second mortgage typically has higher interest rates to account for the additional risk.
  • schoolSurvey
    A survey determines the exact measurement and boundaries of land associated with a property. It typically includes any easements or encroachments on the property.
  • schoolTriple net lease
    A lease agreement whereby the tenant is responsible for paying for operating expenses, such as real estate taxes, insurance, and maintenance costs.
  • schoolUnderwriting
    Underwriting is the act of reviewing the creditworthiness of a borrower and the value of the collateral securing the loan.
  • schoolVacancy rate
    A vacancy rate is the yearly percentage of units that are vacant or unoccupied at any given time.
  • schoolVacant land
    Vacant land is Real Estate without any structure.