In real estate, collateral refers to property or assets that a borrower offers to a lender as security for a loan. It reduces the lender’s risk by providing a way to recoup the loan amount if the borrower defaults.
Credit enhancement refers to a range of strategies or instruments used to reduce the risk of lending to a particular individual or company, thereby increasing their credit quality.
A deficiency judgment is a court order that mandates the borrower to pay the outstanding balance on a loan when the collateral or security for that loan does not entirely cover the defaulted debt.
A provision in a mortgage that pledges multiple properties as collateral, potentially including newly acquired properties owned by the borrower. A default on one mortgage constitutes a default on the one with the dragnet.
An equity loan, often referred to as a home equity loan or second mortgage, allows homeowners to borrow money by leveraging the equity in their homes. It is a type of loan in which the borrower uses the equity of their home as collateral.
A home loan, often synonymous with 'mortgage', is a type of loan specifically used for purchasing real estate property. The borrower is required to pay back the loan over time, typically with interest, and the property usually serves as collateral.
Hypothecating is the act of pledging an asset as collateral to secure a loan without transferring the title or the asset itself to the lender.
A leasehold estate refers to a tenant’s right to occupy and use real estate for a defined period as stipulated in a lease agreement. Leasehold estates provide tenants with significant rights over the property during the lease term.
A loan contract is a document that acknowledges the debt of the borrower and establishes the terms by which that debt is to be discharged. It outlines the payment schedule, prepayment conditions, and what constitutes a default. In cases of mortgage loans, it also includes pledges of real property as collateral.
A mortgage is a legal agreement in which a lender provides a borrower with funds to purchase real estate. The property serves as collateral for the loan.
A mortgage note is a legal document that outlines the terms of a loan agreement secured by real estate property. It details the borrower's obligation to repay the lender, the loan amount, interest rate, repayment terms, and other provisions.
A NINJA loan is a type of secured loan given to borrowers with no income, no job, and no assets. These loans carry high risk for lenders and were popular during the mid-2000s credit bubble, partly because lenders anticipated rising real estate values.
A package mortgage is a type of mortgage arrangement where the principal amount loaned is increased by including both personalty (e.g., appliances) and realty (real estate) as collateral.
A Pledged Account Mortgage (PAM) is a type of home purchase loan where the borrower sets aside a sum of cash in a pledged account that is used to supplement mortgage payments in the initial years, reducing the payment amount during this period.
Recourse refers to the legal right of a lender to claim money from a borrower in the event of default, in addition to repossessing the property pledged as collateral.
Repossession refers to the forced retrieval of property by a lender or lessor when a borrower or lessee defaults on contractual obligations, such as missing payments. This legal process primarily involves reclaiming collateral used to secure a loan or leased items and is often juxtaposed with the term foreclosure.
A Secured Loan is a loan that is backed by an asset or collateral, reducing the risk for the lender and often resulting in lower interest rates for the borrower. Examples include mortgages and auto loans.
Securitization is the process of pooling various types of debt—including mortgages, car loans, or credit card debt—into packaged securities that can be sold to investors.
Security in real estate is an important concept that can refer to collateral for a debt or a financial instrument that represents ownership rights. Proper understanding of security mechanisms protects investments and aids in ensuring lawful exchanges.
Security interest refers to a legal claim on collateral that has been pledged, usually to obtain a loan or other obligation.
A specific lien is a claim on a specific piece of property used as collateral for a loan. This differs from a general lien, which is a claim on all assets of an individual.
A spreading agreement is a financial arrangement that extends collateral over multiple properties, often used to secure additional loans or consolidate existing loans.
A trustor is an individual or entity that creates a trust by transferring assets to a trustee for the benefit of beneficiaries. In real estate, a trustor may also refer to someone who gives a deed of trust as collateral for a loan.
