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Mortgage Dictionary
By Robert Irwin, Global Home Loans & Finance

Select the first letter of the term you wish to find:
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Abstract (of Title)
A historical summary of all the recorded transactions that affect the title to the property. An attorney or a title company will review an abstract of title to determine if there are any problems affecting the title to the property. All such problems must be cleared before the buyer can be issued a clear and insurable title.

Acceleration Clause
A loan provision giving the lender the power to declare all sums owing lender immediately due and payable upon the violation of a specific loan provision, such as the sale of the property, or the failure to make loan payments on time.
Example : John sells his property to Mary who takes over John's mortgage payments. They do not notify the lender of this transaction. The lender finds out that the title to the property has transferred and calls the loan, since the loan documents state that the loan is due on the sale of the property. John is now liable to pay his lender in full.

The addition to land through natural forces like wind or water.
Example : deposit of soil carried by a river

Agreement of Sale
A written signed agreement between the seller and the purchaser in which the purchaser agrees to buy certain real estate and the seller agrees to sell upon terms of the agreement. Also known as contract of purchase, purchase agreement, offer and acceptance, earnest money contract or sales agreement.

Formal declaration before a public official (typically a Notary Public) that one has signed a document. Required before recording real estate legal documents, such as a deeds of trust.

A measure of land equal to 43,560 square feet.

Adjustable Rate Mortgage (ARM)
Also known as a variable rate mortgage. The interest rate on these mortgages changes periodically.

Adjustment Period
This is the length of time for which the interest rate is fixed on an adjustable. Therefore if the adjustment period is six months, then the interest rate will remain fixed for six months, after which time it will adjust.

A gradual paying off of a debt by periodic installments which pay principal and interest.

Annual Percentage Rate - APR
The effective rate of interest for a loan per year. This rate is typically higher than the note rate because it takes into account closing costs. This is one way to compare loan programs offered by different lenders. Caution : the APR is sometimes computed differently by different lenders and can be misleading.

An opinion or estimate of the value of a property at a given date.

Arm's length transaction
A transaction among parties each of who acts in his or her own best interest.
Example : A transaction between a father and his son would NOT be an an Arm's length transaction

A local tax levied against a property for a specific purpose such as street lights.

Assumable Mortgage
A mortgage loan which allows a new home buyer to take over the obligation of making loan payments with no change in the terms of the loan. Assumable loans do not have a due-on-sale clause. The lender has to be notified and agree to the assumption. The lender may require the buyer to qualify for the loan and may charge an assumption fee. The seller should obtain a written release from the lender stating clearly that he/she is no longer liable to make mortgage payments. See also "Subject To".

Attorney In Fact
One who is authorized to act for another under a power of attorney which may be general or limited in scope.
Example : John wants to sell his house but has to be out of the country for 4 months. John gives authorization to Mary to sign the grant deed to sell the property to a buyer. Mary becomes John's Attorney In Fact.

Balloon (payment) Mortgage
Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract.
Example : A balloon mortgage for $25,000 has interest only payments for 5 years at 12% ($250 per month), with the full principal of $25,000 due and payable after 5 years.

The financial inability to pay one's debts when due. The debtor surrenders his assets to the bankruptcy court. An individual typically files for Chapter 7 (all debts wiped out) or Chapter 13 (establishes a payment plan to pay off debts). A bankruptcy stays on an individual's credit report for 7 years.

The person who receives or is to receive the benefits resulting from certain acts.
Example : The lender is named as the beneficiary on a mortgage loan.
Example : John has a life insurance policy for $100,000 with Jane as his beneficiary. Should John die - Jane will receive the benefits i.e. $100,000.

Definition #1: A title insurance binder is the written commitment of a title insurance company to insure title to the property subject to the conditions and exclusions shown on the binder.
Definition #2: Preliminary agreement, normally secured with earnest money, between a buyer and a seller as an offer to purchase real estate. 

Bi-weekly Mortgage
A mortgage which requires 1/2 the normal monthly payment every two weeks. Over the course of the year, 26 half payments are made which is equivalent to 13 full mortgage payments. As a result of this extra payment the loan amortizes much faster than a loan with normal monthly payments.

Blanket Mortgage
A mortgage covering more than one piece of property. 
Example : A developer subdivides a tract of land into lots and obtains a blanket mortgage on the whole tract. 

1. A debt instrument in the capital markets. The U.S. government, corporations and municipalities use bonds to raise money. Bonds can also be backed by mortgages. The best known bond is the 30-year treasury bond issued by the U.S. government.
2. A sum of money given to a court to guarantee against a loss. For example if there is a lien on a property, the owner may remove the lien by posting a bond.

Borrower (Mortgagor)
One who applies for a loan secured by real estate and is responsible for repaying the loan (mortgage). 

Bridge Loan
An interim loan typically used when the buyer is unable to sell his/her house but needs money to close the transaction on the house he/she is buying. The bridge loan is made on the buyers current residence to finance the buyers new residence. The loan is paid off when the buyers current residence is sold.

See Real Estate Broker or Mortgage Broker. 

Buy Down
Obtaining a lower interest rate (buying down the rate) by paying additional points to the lender. The lower rate may apply for the full duration of the loan or for just the first few years. A buydown may be used to qualify a borrower who would otherwise not qualify . This is because a buydown results in lower payments which are easier to qualify for.
Example : A very popular buydown is the 2-1 buydown. If the interest rate on the note is 9%, the buydown results in the rate being 7% (9%-2%) for the first year, 8% (9%-1%) for the second year, and 9% thereafter. 

Buyers Broker
An agent hired by a buyer to locate a property for purchase. The broker represents the buyer and negotiates with the sellers broker for the best possible deal for the buyer.

Buyers Market
Market conditions that favor buyers i.e. there are more sellers than buyers in the market. As a result buyers have ample choice of properties and may negotiate lower prices. Buyers markets may be caused by an economic slump or overbuilding. 

A set of regulations by which an organization conducts its business. 
Example : A condominium association prepares bylaws that state the minimum number of owners to conduct a meeting to decide policies. 

Select the first letter of the term you wish to find:
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Robert Irwin