Terminology
 

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Amortization schedule
A month-by-month breakdown of principal and
interest to be paid on a note as well as the balance
after payment is made.

Annuitant
The person receiving payments from an annuity.

Annuity
An income stream paid over time by an insurance
company.

Balloon payment
A loan payment (lump sum payment) whose purpose
is to pay off the loan in full.  It is usually much larger
than a normal monthly payment.  The main reason to
consider such a payment is that the interest rate usually
will be lower than that on a normal 15 or 30 year loan.
As a result, the payments will be a little lower than those
of a longer term loan until the balloon payment is due.

Beneficiary
A person who is designated to receive a payment or
payments.


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Collateral
Something used to secure a loan or note.  For example,
your home would be used as collateral when you apply
for a "traditional" mortgage.

Contract for Deed
A transaction in which the seller finances the sale of his
or her property.  In this scenario, the buyer agrees to
make monthly payments which are applied toward the
purchase price of the house.
***Also known as bond for deed, land contract, or
installment land contract.

Credit Score
A number that is assigned to an individual's credit
report that rates their likelihood of repaying a debt.

Debt ratio
An individual's total debt in relation to their income.

Deed of Trust
A document that gives a lender the right to sell
your property if you can NOT repay your loan.
With a deed of trust, three parties are involved;
the borrower, lender, and a trustee.
The borrower conveys (passes, gives) title to a
trustee who will hold title to the property for
the benefit of the lender.  The title remains
"
in trust" until the loan is paid.

Equity
The difference between what a property is worth
and how much is owed on it.

Estoppel letter
A letter that is sent to the payer of a mortgage note
prior to funding the transaction.  This letter asks the
payer to verify the balance, interest rate on the note,
payer's work number, etc.  In addition, this letter is 
required by a lender in a real estate transaction to
establish outstanding amounts due that can effect
the settlement of the loan.  And, the lender is relying
on representations made in order to complete the loan
process for the borrower.

First position note
A note that takes precedence over all other liens and
notes.

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Hypothecation
The process of buying a property with borrowed funds,
and then using that same property to secure (collateral-
ize) the loan.
Legally, hypothecation is the granting of a hypothec to
a lender by a borrower.  In reality, a borrower secures
a loan by using his or her house or another asset as
collateral.  And, at the same time, the owner retains
ownership of the "pledged" asset.  Hypothecation is
nearly synonymous to a lien or mortgage.

Income stream
Any kind of note that is paid out over time, same as
"payment stream".

Land Contract
Also known as a contract of deed or agreement for sale.
A land contract is an installment sale in which an indi-
vidual buys a home today but only gets title after some
or all of the payments are made.  If you miss a payment,
then you could lose some or all of your equity.
Because title has not been transferred, there is nothing
to foreclose on.


Loan-to-value
Also referred to as LTV.  This is the ratio of the loan
amount to the value of the property.

Mortgage
A loan needed to purchase real estate, with the dollar
amount paid back in predetermined monthly payments.

Mortgagee
The person or investor who receives the payments
from a mortgage.

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Mortgager
The person who makes the payments on a mortgage.

Owner financing (Seller financing)
The seller of a property or business finances the sale
of that home or business.

Partial
The purchase of a portion of an income stream's
remaining payments, the purchase of a specific
payment, or any combination of the two.

Promissory note
Basically, it is a piece of paper.  It is an IOU with a promise
to pay back money to a lender.  It is also known as an
installment note, a demand note, a straight note, and paper.
     

Purchase Money Mortgage
A mortgage issued to the borrower by the home seller
as part of the purchase transaction.  
***Also known as seller financing, and is an effective way
for a prospective buyer who can not qualify for a mort-
gage in the "traditional" fashion.

Seasoning
The length of time a mortgage note or business
note has been in place and paid on.

Second position note
A mortgage note that is "behind" another note on
the same property.

Secondary mortgage market
An existing mortgage is purchased and sold here.  A
new mortgage is originated in the primary mortgage
market.

Time value of money
Addresses the way the value of money changes over
a period of time.  It determines how much a future
payment is worth in today's dollars.

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Title insurance
Insures that a piece of property is "free and clear" of
any liens.

Underlying note balance
Occurs when a note holder of a mortgage is currently
making payments on another note (the underlying
note
).

For example, if a person sells a property for $100,000
and takes back a note (seller financing) but still owes
a mortgage of $20,000, then this $20,000 is the under-
lying balance.


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