Alt-A mortgages are residential property-backed loans made to borrowers who have better credit scores than subprime borrowers but provide less documentation than normally required for a loan application.
An Alternative Mortgage Instrument (AMI) is any mortgage other than a fixed-interest-rate, level-payment amortizing loan. These instruments are often used to accommodate varying financial circumstances and offer different terms compared to traditional loans.
A balloon payment is a large, one-time payment made at the end of a loan term that is significantly larger than all previous payments. Often seen in both commercial and residential real estate financing, balloon payments also apply to business and personal loans.
A balloon payment is a large sum repaid as an irregular installment in loan repayment, often seen as the final payment in loan structures where it is significantly larger than previous regular payments.
A blanket mortgage is a loan that covers more than one parcel of real estate. This type of mortgage is commonly used by developers who seek financing for a large tract of land that they plan to subdivide and sell without retiring the entire mortgage.
A critical financial concept, the break-even point represents the point at which total revenues equal total costs, resulting in neither profit nor loss. It is widely used in finance, real estate, and securities to determine financial health.
A construction loan is a short-term real estate loan utilized to finance building costs. Funds are disbursed as needed or according to a prearranged plan, repaid upon project completion, often from a mortgage loan. These loans typically come with higher interest rates and origination fees.
A direct-reduction mortgage is a type of loan that requires both interest and principal to be paid with each installment, ensuring the loan is fully amortized by the end of its term.
Discount points are amounts paid to the lender at the time a loan is originated, often by the seller, to bridge the gap between the market interest rate and the lower face interest rate of the note.
FNMA, also known as Fannie Mae, is a government-sponsored enterprise (GSE) created to expand the secondary mortgage market by securitizing mortgages, thereby allowing lenders to reinvest their assets into more lending.
A fully amortized loan is one in which payments of both interest and principal are made regularly according to a set schedule, which are sufficient to liquidate the loan over its term; it is essentially self-liquidating.
Hangout refers to the remaining balance of a loan when the term of a loan exceeds the term of the lease of the property securing the loan.
A Home Equity Line of Credit (HELOC) is a type of home equity loan that establishes an account the borrower can draw upon as desired, with a maximum outstanding debt limit similar to a credit card.
A Jumbo Mortgage is a loan for an amount exceeding the statutory limit placed on the size of loans that Freddie Mac and Fannie Mae can purchase. These loans must be maintained in the lender's portfolio or sold to private investors rather than Fannie or Freddie. Often associated with the purchase of luxury homes, jumbo mortgages differ from conforming loans.
A mortgage assumption is a financial arrangement where a buyer takes over the seller's existing mortgage, continuing to make payments under the same terms.
A mortgage banker is a financial individual or institution that originates, sells, and services mortgage loans. Unlike traditional banks or thrifts which fund loans from deposit accounts, mortgage bankers typically use funds from the sale of the mortgages.
The Mortgage Constant is the percentage ratio between the annual debt service and the loan principal.
Mortgage debt refers to the amount of money owed under a mortgage, which is a type of loan used particularly for financing the purchase of real estate.
A Mortgage Insurance Policy is designed to protect lenders and borrowers in mortgage agreements by covering payments in certain situations, such as default or borrower death.
A Mortgage REIT is a type of Real Estate Investment Trust that lends stockholder capital to real estate builders and buyers. Mortgage REITs also borrow from banks and relend that money at higher interest rates.
Nonrecourse debt is a type of debt secured by collateral, typically real estate, where the lender's recourse in case of default is limited to the collateral, and the borrower has no personal liability beyond the collateral.
An Open-End Mortgage refers to a type of mortgage under which the borrower can borrow additional funds from the lender, typically up to a specified ceiling.
An Option ARM is a type of adjustable-rate mortgage that allows the borrower to select from different payment options each month, including fully amortizing payments, interest-only payments, and minimum payments resulting in negative amortization.
The specific date on which the interest rate of an Adjustable-Rate Mortgage (ARM) can be recalibrated as per predetermined terms.
Preleasing involves obtaining lease commitments for a building or complex before it is available for occupancy. It is often a requirement for securing a permanent mortgage.
Seller financing, also known as owner financing, is a method in which the seller of a property provides a loan to the buyer for the purchase of the property, as opposed to the buyer obtaining a mortgage through a third-party lender. This is often used when traditional lender financing is unavailable or less attractive.
A senior mortgage, also known as a first mortgage, refers to a loan that has priority over other loans or claims against the property in the event of default. It occupies the primary lien position on the property.
A Shared-Appreciation Mortgage (SAM) is a residential loan characterized by a fixed interest rate set below market rates. The lender is entitled to a specified share of the appreciation in property value over a specified time interval.
A takeout loan in real estate refers to a long-term mortgage loan made to refinance a short-term construction loan. In the securities industry, takeout refers to the withdrawal of cash from a brokerage account, usually after a sale and purchase have resulted in a net credit balance.
A wraparound mortgage is a loan arrangement where an existing mortgage is retained, and a new, larger loan is provided. The new lender remits payments on the existing loan and usually experiences a higher yield due to the difference in interest rates between the old and new loans.
