Real Estate Finance

acceleration clause

The acceleration clause authorizes the mortgagee to accelerate or advance the due date of the entire unpaid balance if the mortgagor fails to fulfill any promises stated in the mortgage instrument.

adjustable-rate mortgage (ARM)

The adjustable-rate mortgage (ARM) has become the most widely accepted alternative to the traditional 30-year fixed-rate level-payment mortgage. The ARM is an attempt to create a happy compromise between the needs of lenders and borrowers. FHA and VA reco

amortized mortgage

An amortized mortgage is gradually and systematically killed or extinguished by equal regular periodic payments.

assignment of mortgage

When ownership of a mortgage is transferred from one company to another, it is called an assignment. This process is accomplished by executing an assignment of mortgage.

balloon payment

A single large final payment, including accrued interest and all unpaid principal, then becomes due on the loan maturity date (referred to as a balloon payment).

biweekly mortgage

A biweekly mortgage loan is amortized the same way as other loans with monthly payments, except the borrower makes a payment every two weeks, or a total of 26 biweekly payments.

blanket mortgages

Blanket mortgages cover a number of parcels, usually building lots. The developer uses proceeds from the sale of individual lots to pay off the blanket mortgage.

contract for deed

Also called a land contract, agreement for deed, or installment sale contract, the contract for deed is another way to buy real property, usually with very little cash investment. The seller accepts a down payment from the buyer and finances the rest of t

deed in lieu of foreclosure

The defaulting borrower gives title (the deed) to the lender to avoid judicial foreclosure.

defeasance clause

The defeasance clause is so named because it "defeats" the prior action when the borrower-mortgagor has made the final payment on the loan

due-on-sale clause

A due-on-sale clause allows the mortgagee to call due the outstanding loan balance, plus accrued interest, if the property is sold or transferred without the lender's prior written consent.

entitlement

A veteran's entitlement is the maximum amount the governement guarantees the lender will be paid in the event the borrower defaults

equity of redemption

Equitable redemption, available in all states today, allows the mortgagor to prevent foreclosure from occurring by paying the mortgagee the principal and interest due plus any expenses the mortgagee has incurred in attempting to collect the debt and initi

estoppel certificate

The estoppel certificate verifies the amount of the unpaid balance, the rate of interest, and the date to which interest has been paid prior to the assignment. The purpose of an estoppel certificate is to stop a claim that the amount owed is different fro

home equity loans

Homeowners use home equity loans to finance consumer purchases; consolidate existing credit card debt; and pay for college tuition, medical expenses, or home improvements. Because the interest on most home equity loans is tax deductible, they are more pop

hypothecation

Hypothecation refers to the pledging of property as security for payment of a loan without surrendering possession of the property. Mortgages identify the property being used to secure a loan and contain the borrower's promises to fulfill certain other ob

loan-to-value ration (LTV)

The loan-to-value (LTV) ratio is the relationship between the amount borrowed and the appraised value (or purchase price) of a property.

mortgage

A mortgage is the instrument in which real property is pledged as security for a debt. It is the contract between the lender and the borrower that contains a number of provisions (clauses) specifying the terms and conditions of the agreement.

mortgage insurance premium (MIP)

The borrower is also charged an annual mortgage insurance premium (MIP), added to the monthly mortgage payment.

mortgagor

borrower or debtor

note

The note is a promise to pay the lender for the debt incurred, and it exposes both personal and real property to risk if the debt is not paid.

novation

Novation is the substitution of a new debtor (the buyer) and release of a former debtor (the seller) for an existing debt by mutual agreement and with approval of the lender.

package mortgage

A package mortgage loan includes both real and personal property as security for the debt. A buyer uses a package mortgage, for example, when purchasing a restaurant complete with cooking equipment and other personal property that serve as a part of the c

partial release clause

A partial release clause commonly used in blanket mortgages provides for the release of individual parcels from the blanket mortgage upon payment of a specified amount. The partial release clause stipulates the conditions under which the mortgagee (lender

prepayment clause

A prepayment clause allows the borrower to pay off part or all of the debt, without penalty or other fees, prior to maturity. In Florida, a borrower has the right to prepay his or her mortgage loan unless the mortgage instrument states otherwise. A prepay

prepayment penalty

The lender may choose to charge a prepayment penalty for early payment, if provided for in the mortgage instrument.

purchase-money mortgage (PMM)

A purchase-money mortgage (PMM) is a mortgage given as part of the buyer's consideration for the purchase of real property.

receivership clause

A receivership clause allows a receiver to be appointed to collect income from the property and use the income to make mortgage payments in the event of default.

satisfaction of mortgage

On that joyous occasion when the mortgagor pays the debt in full, the mortgagee executes a satisfaction of mortgage (or a release of mortgage).

subordination clause

A subordination clause provides that the lender (usually the seller) voluntarily will allow a subsequent mortgage to take priority over the lender's otherwise superior mortgage (the act of yielding priority).

wraparound mortgage

A wraparound mortgage envelops an existing mortgage and is subordinate (junior) to it. The existing mortgage stays on the property and the new mortgage "wraps" around it. A wraparound mortgage is commonly taken by a seller who continues to be responsible