Amortization: The method by which the outstanding balance of a loan is reduced by making equal payments on a regular schedule (usually monthly). The payments are structured so that the borrower pays a portion of both interest and principal with each equal payment.
Assignment: The process by which ownership in some portion of future payments is transferred from one party to another. The Assignment Form is signed by the seller at closing, then recorded.
Balloon Mortgage: A fixed-rate mortgage for a set number of years (usually 15 years or more) which then must be paid off in full in a single “balloon” payment at a future earlier date (usually 3 to 10 years from the original date of the mortgage).
Broker: Note Broker, Cash Discounter, Note Buyer, Mortgage Broker, Paper Broker
An individual or company in the business of assisting in arranging funding or negotiating contracts for a client but who does not necessarily advance the funds himself. Brokers usually charge a fee or receive a commission for their services.
Chattel: Security other than real estate; i.e., inventory, equipment, etc.
Closing Statement/Settlement Statement: Also known as a HUD1. This document is prepared by the title company or closing attorney and details all funds received and disbursed at the time of purchase and closing on the property.
Contracts: The written understanding between the parties. May be a mortgage, land contract, contract for deed, deed of trust, etc.
Contracts for Deed: Similar to a mortgage in that it secures the obligation with the underlying real estate, it differs in that the property has not yet been transferred (deeded over). Transfer of the deed is contingent upon all terms of the Contract having first been fulfilled.
Deed of Trust: Similar to a mortgage, this is a recorded document that in conjunction with the mortgage note creates a security interest in real property.
Down Payment: Money paid by a buyer from his own funds, as opposed to that portion of the purchase price which is financed.
Equity: The difference between the current market value of a property and the principal balance of all outstanding mortgage loans.
Hazard Insurance: A form of insurance in which the insurance company protects the insured from certain losses, such as fire, vandalism, storms and certain other natural causes.
Land Contracts: Similar to a mortgage in that it secures the obligation with the underlying real estate, it differs in that the property has not yet been transferred (deeded over). Transfer of the deed is contingent upon all terms of the Contract having first been fulfilled. A land contract usually applies to the purchase of the land only, while a Contract for Deed typically covers structures as well.
Loan to Value (LTV): The ratio of the principal balance of mortgages attached to real property to the appraised or “Market Value” of the real property. Example: A home worth $100,000 secured by an $80,000 mortgage would have an 80% LTV.
Mortgagee: the party receiving the mortgage payments.
Mortgagor: the party responsible for making the mortgage payments. Also known as the “Payor”
Mortgagees Title Policy: A title insurance policy protecting the holders of the mortgage against possible defects in title.
Mortgage/Mortgages: A recorded document that in conjunction with the mortgage note creates a security interest in real property. In some States, referred to as a Deed of Trust.
Owner-financed: A note and mortgage taken by the seller or financier of a property, in lieu of cash provided by an institutional lender.
Owners Title Policy: A title insurance policy protecting the purchaser of the property against possible defects in title.
Partial Purchase/Partial Sale: The sale or purchase of only part of the remaining payments due on the mortgage note. The Seller receives cash at closing, plus they also receive the residual value, when due, of their portion of future payments not sold initially. See also – Cash Options
Payors: The party or parties obligated to pay on the note and mortgage. Also referred to as Mortgagor(s).
Real Estate Contracts: Any document relating to the ownership, transfer or securitization of real property.
Real Estate Notes: Any note or obligation secured by real property.
Recorded Documents: A document filed and officially recorded in the County recording offices, putting all parties on notice as to ownership, etc.
Residual Value of Mortgage/Note: When a mortgage/note is sold under a Partial Sale arrangement, the seller of the note is entitled to receive the mortgage back when the terms of the assignment have been met. The amount of this ‘residual balance’ may be affected by early prepayment, default, and other factors.
Seasoning: This refers to the number of payments made to-date on a mortgage note. A note where 25 months payments have been made, is said to be “seasoned 25 months.”
Second Mortgages: A mortgage junior to a first mortgage lien; i.e., put in place and recorded after the recording of a first mortgage. The first mortgage has priority over the second mortgage in terms of repayment in the event of default.
Title Insurance: A policy issued by a title insurance company protecting the parties against defect in title.
Trust Deeds: A recorded document that in conjunction with the note creates a security interest in real property. In some States, referred to as a Mortgage.