Acceleration Clause

The clause found in mortgage deed permitting mortgage lender to request outstanding monies from the loan. This can be down to a number of different situations for example, moving over title deeds to someone else or missing a mortgage payment.

ARM (Adjustable Mortgage Rate)

This is a mortgage that has a variable interest rate meaning the interest is subject to fluctuation according to the Bank of England’s (or if related to another country, their main bank) set interest rate, the rates are always tied to indexes.

Adjustment Date

If holding an adjustable rate mortgage this is the date that the interest rate is revised.

Amortization

This is the process of paying off a mortgage loan or interest on a mortgage loan over a period of time in the form of regular payments. A certain amount of each payment made is used for the interest and the rest of the amount is used towards the principal balance. As the loan amount reduces over a period of time so does the interest.

Amortization Schedule

This is a document normally in the form of a table or chart detailing quantity of payment to be used for principal of the loan and how much will be used to pay off the interest of the loan for the duration of the debt. The table will also detail the reduction of the loan balance until nothing is owed.

APR (Annual Percentage Rate)

APR will detail much the interest and charges on a mortgage or loan will cost per year. It is expressed a percentage that has been arrived at by using a government formula. It takes into account interest charges, arrangement fees, annual charges and other costs. As interest charges can fluctuate it is difficult to work it out exactly but as an example if you pay 21% over 6 years your yearly rate will be 21 divided by 6, equating to 3.5% which means you will be paying an extra 3.5% of what you borrowed in interest and by the end of the 6 year loan you will have paid 21%.

Application

When applying for a mortgage an individual or couple will fill out an application form which will request details pertaining to financial position including what earnings, any savings, whether there are have any assets or if there is debt such as credit cards or other loans.

Appraisal

This is a document produced by a qualified appraiser which will assess the market value and estimate the current value of the property in question.

Appraised Value

The appraised value is the suggested market value of the property in question that has been recommended by an appraiser’s expertise and analysis. It is normally disclosed at the point of purchase.

Appraiser

The appraiser is a qualified person who has been educated to be able to perform a property appraisal. It may be someone working for mortgage companies but most work independently.

Appreciation

This is the value amount of a property and it fluctuates according to the country’s inflation, market conditions or other reasons.

Assessed Value

A tax assessor performs valuations on properties in order to put into place correct taxation.

Assessment

This is the value placed on a property for taxation calculations.

Assessor

This is an authoritative person who will determine property value in order to calculate taxation.

Asset

These are valuable items belonging to a person for example property, personal property such as jewellery and even debt owed to that person. Liquid assets are items that can transformed into cash with speed such as stocks and shares, bonds, bank accounts, savings accounts etc.

Assignment

This is the term used for the transfer of mortgage from one company to another or to a person.

Assumable Mortgage

This is when the home buyer is able to take over the existing mortgage of the seller on the approval of the mortgage lender. The home buyer must be able to qualify for the assumable mortgage.

Assumption

This is the term referred to when the home buyer takes on or assumes the mortgage of the seller.

Balloon Mortgage

This is a short term mortgage which requires the borrower to make payments regularly at specified times. Following this, the borrower then pays the remainder in a short period of time. So you may be paying monthly payments for 15 years and then have to pay the balance at the end of the 15th year.

Balloon Payment

This is the term referred to the final payment at the end of a Balloon Mortgage.

Bankruptcy

Bankruptcy is a legal proceeding when an individual has been declared rid of all liabilities and debt due to inability to pay. Once bankruptcy has been declared, the individual cannot take a loan for two years after the bankruptcy has been discharged. When undertaking a new loan following the aforementioned two year period, they will also need to establish themselves as able to pay it off.

Bill of Sale

This is a specific document that transfers personal property normally used as security for a debt or a down payment.

Bi-weekly Mortgage

This is similar to a monthly mortgage except payments are made fortnightly; the additional payment will reduce the principal therefore reducing the time it takes to pay off a 30 year mortgage. It is easy to set up an account to make your own payments rather than using an independent company who may be encouraging you to set up a biweekly payment schedule with them for this purpose. They will often charge you for set up and transfer fee for each payment which by setting up your own account, can be avoided.

Bond Market

This is the financial market where those involved can issue new debt and buy and sell debt securities usually in the form of bonds. As the yields of bonds rise and fall so do fixed rate mortgages and the same factors affecting the Treasury Bond market will equally affect rates on mortgages, these changes can occur daily if not hourly in a transient market.

Bridge Loan

These are a rarity nowadays but they are loans taken on by individuals or people who have not yet sold their property but need to exchange on a new property. The bridging loan then becomes the funding source for their new property down payment. These are less popular because sellers are more comfortable accepting offers from those who have already sold their property as well as more second mortgage lenders lending at a high loan to value rate.

Broker

A mortgage broker is someone who brokers loans to lenders and investors rather than lending the money themselves – they will “broker” the deal therefore acting as an agent and bringing the mortgage lender and mortgagee together. In doing so, they will earn a fee for any transaction that takes place.

Buydown

This is more commonly known as a fixed rate mortgage and is when the interest rate is taken down for a fixed period of time perhaps 1 to 3 years but it can be longer. Following this period of time and for the remainder of the mortgage term, unless re-negotiated the borrower must pay the interest at the current rate of interest. To obtain the Buydown one lump sum is paid and held in an account which is used to supplement the monthly mortgage payments. There is another term, a “lender funded Buydown” which is when the lender will pay the lump sum and this can be done because the interest rate on the loan is higher than the current market interest rate. This is done for a number of reasons, for example, when a borrower is expecting his or her earnings to grow by a large amount but would like to start repayments off at a lower rate or because the borrower is able to qualify for a larger mortgage loan sum.

Call Option

This is comparable to the Acceleration Clause: The clause found in your mortgage deed permitting your mortgage lender to request outstanding monies from your loan. This can be down to a number of different situations for example, moving over title deeds to someone else or missing a mortgage payment.

Cap

This is a mortgage that is “capped” at a limited amount. These make sure that your mortgage payments will not exceed a certain amount. They do work on a variable rate so they give you the added benefit of lower monthly payments when interest rates reduce. Some Adjustable Rate Mortgages have caps too but may require a minimum payment which can be adjusted yearly.

Cash-out Refinance

This is the term used when a borrower re-mortgages at a higher amount than the existing loan intending to take out money from the mortgage for personal use.

Certificate of Deposit

This is a time deposit which is a financial product held by the bank paying an amount of interest to the person depositing.

Certificate of Deposit Index

This is the name for an index used for working out the interest rate changes on ARM’s (Adjustable Rate Mortgages). It is determined as the average of what banks are paying on certificates of deposits.

Certificate of Eligibility

Once a veteran has been declared as eligible this document (COE) is issued and verifies to the lender that you are able to obtain a VA backed loan.

Certificate of Reasonable Value (CRV)

Following the appraisal on a property being purchased using a VA loan, a CRV is issued by the Veterans Administration.

Chain of Title

This is a document detailing the transfers of title deeds over the years on a property.

Clear Title

This is a title deed with no legal questions or liens pertaining to the ownership of the property in question.

Closing

This is also referred to as completion, when the deal is “closed” and signatures have been obtained and money has been transferred between relevant parties.

Closing Costs

These are separated into two different areas, the non-recurring closing costs and pre-paid items. The former refers to anything that has been paid just once following buying the property or gaining the mortgage whereas pre-paid refers to costs over time such as taxation and insurance.

Closing Statement

This is the same as Settlement Statement.

Cloud on Title

This is the term referred to following a title search and means conditions have been revealed that affect the title of the property in question. They are difficult to remove without court action, deed or release.

Co-Borrower

This is the term relating to the individual duty bound on the loan and property title.

Collateral

When referring to a home loan or mortgage the property will be the collateral. If the mortgage is not repaid according to the terms documented then the borrower is at risk of losing the property (collateral).

 

Collection

This is the term relating to amounts that are unpaid by the borrower on their mortgage or home loan. The lender will then endeavour to go to “collection” and recover owed monies. This is recorded and documented in case the property is recalled by the lender if mortgage amounts continue to be unpaid according to terms set down.

Commission

This is the amount earned by sales people involved in buying and selling property and includes Estate Agents, Mortgage Lenders, and Lawyers etc. Once the property has been sold and purchase transaction complete, monies have been released and commission owed is paid out.

Common Area Assessments

Also referred to as Homeowners Association Fees these are charges paid out to the Homeowners Association by the owners of units in flats, condominiums or apartments. This money is used to maintain the common parts of the properties.

Common Areas

These are the areas of a block of flats, apartments or condominiums owned by a freeholder and shared by those who are the leaseholders. Common areas can be gardens, swimming pools, outside areas, front gardens, garages, corridors, hallways etc.

Common Law

This is English law derived by customs and judiciary as opposed to statutes.

Community Property

This term refers to the distribution of property acquired by a husband and wife should the marriage end by death or divorce.

Comparable Sales

Also known as “comps”, this is the term referring to property values in areas close by the property in question and is used to determine its current market value.

Condominium

This is a term of ownership rather than a property development and is when all of the owners own the property concerned including the buildings and the common parts except for the interior.

Condominium Conversion

This is when there is a changed ownership often of a rental of an existing building to a condominium style of ownership.

Condominium Hotel

This is condominium acting as a commercial hotel even though the units are themselves individually owned, therefore offers short term occupancy, food service, domestic services and telephone operations.

Construction Loan

This is a stopgap loan for a short period of time used to finance construction costs meaning the lender will pay the builder at intervals while building work advances.

Contingency

Before a contract becomes legally binding a contingency is a condition that must be adhered to, as an example, a survey report that must be complete before a contract to buy the property in question is legally binding.

Contract

This is an agreement in place either documented or orally to do or not do whatever is specified.

Conventional Mortgage

This is the term referring to mortgages as opposed to VA and FHA.

Convertible ARM

This is a mortgage that has an adjustable rate therefore allowing the borrower to change his or her Adjustable Rate Mortgage into a Fixed Rate Mortgage within a designated time frame.

Co-op (Cooperative)

This is a cooperative corporation consisting of residents of multiunit housing who all own shares in the properties thus giving residents rights of occupation of one of these units.

COFI (Cost of Funds Index)

This is the base used for calculating variable rate loans determined by a regional average of interest expenses acquired by financial institutions. It is used for some Adjustable Rate Mortgages and works out interest rate changes.

Credit

This is the agreement where a borrower is able to receive money or an asset promising to repay at a mutually agreeable later date.

Credit History

This is the term referred to when discussing the record of someone’s history of credit or debt and mortgage lenders use these to determine what they can or cannot lend and individual.

Creditor

This is the term referred to someone who is owed money.

Credit Report

A document prepared by a credit bureau detailing a person’s credit history used by lenders to see whether they are a credit risk or not when deciding whether to lend money.

Credit Repository

Sometimes referred to as a credit bureau this is a company that collates and stores information from various sources about those who are seeking credit.

Debt

An amount of money owed to an individual.

Deed

A document detailing the property title.

Deed-in-lieu

A deed-in-lieu is when a homeowner voluntarily transfers the title of a property to his or her lender which in turn releases him or her from the mortgage.

Deed of trust

This is a legal agreement detailing how a property is held by joint owners.

Default

This is when a borrower fails to make a mortgage payment within the designated amount of time. If this is a first mortgage or a first deed of trust and payment is not made within 30 days the mortgage loan goes into default.

Delinquency

This is when a mortgage payment due date is missed and the loan immediately becomes “delinquent”. If the payment is made more than 30 days late the failed payment can be reported to credit bureaus.

Deposit

This is an amount of money paid prior to a large amount which is due in the future.

Depreciation

When a property declines in value it depreciates. Also used when describing assets that have reduced in value, assets are often used as an expense which can reduce income tax.

Discount Points

These points are pre-paid tax deductible interest on mortgages so the more you pay the lower the interest rate becomes on your loan, conversely, the less you pay, the higher the interest rate becomes.

Down Payment

This is an amount used to secure a property prior to the completion amount and is often paid in cash. It is not part of the mortgage.

Due-on-sale Provision

This is a clause in the mortgage stating that the full balance of the mortgage loan can be called in by the lender once the transfer of ownership or sale of a property has taken place.

Earnest Money Deposit

This is an amount of money used by a potential property buyer showing they have serious intent to buy the house in question.

Easement

This is a law giving people the right to cross or use someone else’s land for a specific reason.

Effective Age

Effective age is the estimate of the condition of a property made by an appraiser. It is not the actual age of a building; rather that it is based on the condition.

Eminent Domain

This gives the government the right to pay the market value and take private property for public use. It is also the grounds for starting condemnation proceedings.

Encroachment

This is a home improvement that infringes on someone else’s property.

Encumbrance

This relates to anything that alters the fee simple title (such as a lease, easements, mortgage loan or other restrictions) on a property.

Equal Credit Opportunity Act (ECOA)

This is an American law that came into being in 1974 meaning it is unlawful for a creditor to discriminate against an applicant for age, sex, colour, ethnicity, religion, marital status etc.

Equity

This is the amount of value determined between the market price of the property in question and the amount outstanding on a mortgage or other loans.

Escrow

This is normally an amount of money (although can be a valuable asset or document) held with a third party and released once conditions are completed.

Escrow Account

Some property owners create an Escrow account with a lender which is where money paid monthly includes an extra amount required if you are only paying principal of mortgage and interest, therefore the extra money is held in an Escrow account and is used to pay other things such as insurance and tax for example. The lender who holds the Escrow account for you will then use the amount paid into it to pay these third parties.

Escrow Analysis

This is an annual exercise performed by your lender which ensures that they are collecting the right monetary amount used for items such as home insurance, tax and other items.

Escrow Disbursements

This is when amounts held in Escrow are used for property tax, mortgage insurance and other insurance or expenses as and when required.

Estate

This is the total amount of property (be it personal or real) owned by an individual upon death.

Eviction

The act of expulsion from a property.

Examination of Title

A public records report on the title deeds of a property.

Exclusive Listing

A consent form or contract between estate agent and property owner giving the agent exclusivity when showing or selling the property in question for a designated amount of time.

Executer

The person who administers the estate in a will, if none is named then a court will appoint and administrator to carry out the will execution.

Fair Credit Reporting Act

Passed in 1970, this is an American federal law that regulates use of consumer credit information and forms the basis of consumer credit rights in the USA. It also details the procedure required to rectify errors on a credit record.

Fair Market Value

This refers to the maximum amount a buyer is willing to pay for a property (but not obliged to) and the lowest amount a seller is prepared to sell their property at (but not obliged to).

Fannie Mae (FNMA)

Also known as the Federal National Mortgage Association, it is a shareholder owned American company that is also congressionally chartered. It is also the USA’s biggest home mortgage funds supplier.

Fannie Mae’s Community Home Buyer’s Program

This is a community lending model in America that is income based under which Fannie Mae and mortgage insurers give guidelines to help a low or small income family’s ability to buy and reduce the total amount of money required to buy a house. Borrowers using this facility must go to specially designed education sessions before purchase.

Federal Housing Administration (FHA)

The FHA is an American government organisation which was devised in 1934 as part of the National Housing Act giving the standards for underwriting and construction. It also insures loans made by private lenders and banks for building homes.

Fee Simple

This represents complete ownership of land and gives the owner the right to do what they want with it.

Fee Simple Estate

This is the way property is owned in common law countries and represents the highest ownership possible.

FHA Mortgage

This is an insured FHA (Federal Housing Administration) mortgage sometimes referred to as an US government loan.

Firm Commitment

This is an agreement by a lender to provide a loan to a borrower on a named property.

First Mortgage

It is the mortgage in first place among other loans secured against a property and is normally in reference to the date in which loans are recorded but this is not always the case.

Fixed-rate Mortgage

This is a mortgage where the interest is fixed for a designated amount of time, meaning it does not change during this period of time. Once the period of time is complete, any interest on the remaining loan is then charged according to the current interest rate or subject to other terms detailed in the mortgage agreement.

Fixture

This is a part of personal property that becomes real property once it is made a part of a property permanently, e.g., light fittings

Flood Insurance

This is insurance put into place in case of flood and will compensate for any damage to a property caused by flood; it is generally required for properties in areas of high risk.

Foreclosure

This is a legal process which comes into place when a borrower fails to pay their mortgage repayments and results in the property being taken by the lender and sold at public auction with the proceeds of the sale being set against the debt.

401(k)/403(b)

Provided by private corporations (k) and non-profit organizations (b) these are a special investment plan sponsored by employers which gives individuals the ability to put aside tax-deferred income to be used for either retirement or emergency purposes.

401(k)/403(b) Loan

These are plans allowing for loans against monies in special investment plans (401(k) and 403(b). Certain loans on investment plans (namely 401(k) can be used as down payments for many loan types.

Government Loan (Mortgage)

This is a mortgage insured by the FHA (Federal Housing Administration) or guaranteed by the VA (Department of Veterans Affairs) or the RHS (Rural Housing Service).

Government National Mortgage Association (Ginnie Mae)

This is an American government owned organisation in the US Department of Housing and Urban Development (HUD which came to being in 1968 and provides funds to home loan lenders. However, Ginnie Mae also raises funds for government loans.

Grantee

When buying land or property the buyer is often known as the grantee.

Grantor

When buying land or property the seller is often known as the grantor.

 

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