Credit life insurance is a policy that pays off a borrower's debt if they die or sometimes if they become disabled. It contrasts with mortgage insurance, which is specifically designed to protect lenders from defaults.
In the context of real estate, a debtor is a person or entity obligated to repay a debt. The debtor obtains a loan or other form of credit, typically used to purchase property, and is legally responsible for repaying the borrowed amount according to the agreed terms. The opposite of a debtor is a creditor, who provides the loan or credit.
A high loan-to-value (LTV) loan covers more than 100% of the market value of the home. Typically, the coverage can go up to 125% of the property's value. These loans are mainly used for refinancing, making them a form of home equity loan, and are generally reserved for the lowest-risk borrowers.
A prepayment clause permits a borrower to pay off a loan before its maturity date, sometimes incurring a penalty for the privilege of early payment.
Prepayment Privilege refers to the right of a borrower to retire a loan before its maturity date without incurring any prepayment penalty. This feature provides borrowers with the flexibility to pay off loans faster, potentially saving on interest costs over the life of the loan.
Prepayment risk is the probability that a fixed-income security will be retired before its term ends, typically caused by a borrower's provision to prepay the loan balance at any time without penalty, impacting the expected returns for investors.
Usury refers to the practice of charging a rate of interest on loans that is higher than what is allowed by state law, designed to protect borrowers from excessively high interest rates.
