Add-on interest refers to an interest amount that is calculated at the start of the loan term and then added to the loan principal, resulting in equal installment payments over the entire loan period. This method typically results in a higher cost of borrowing compared to other interest calculation methods.
The remaining amount after subtracting relevant values, such as the outstanding principal on a loan or the remaining funds in an account.
An advance commitment is a financial pledge or guarantee from a lender to a borrower, often used to ensure future funding for a project under specified conditions.
A creditor is an entity or person to whom money is owed by a debtor. In a strict legal sense, a creditor is one who extends credit to another for money or other property. More generally, a creditor is someone who has a legal right to demand and recover from another entity a sum of money on any account.
A discount in the context of real estate represents the difference between the face amount of an obligation and the amount advanced or received for the loan. It often indicates the sale of a loan or mortgage at less than its face value.
Disintermediation refers to the process where financial intermediaries, such as banks or savings and loan associations, are bypassed, and funds are directly invested into other assets to seek higher yields.
The Equal Credit Opportunity Act, enacted in 1974 and amended in 1976, is a federal law aiming to eliminate discrimination by lenders based on sex, marital status, age, race, color, religion, national origin, or receipt of public assistance.
Gross Amount refers to the total amount before any deductions or subtractions are made. It is often compared to the net amount, which results after all deductions.
An indenture is a formal legal agreement made between two or more parties, especially regarding obligations in the world of real estate, finance, and bond issuance.
Junk fees are charges levied by a lender at closing in the hope that the borrower will neither question them nor abort the transaction. These fees often are of a questionable nature but are relatively small compared to other legitimate closing costs.
LIBOR, or the London Interbank Offered Rate, is the interest rate at which major international banks lend Eurodollars to one another. It is widely used as a benchmark for adjustable-rate mortgages and other financial products.
A loan officer assists borrowers throughout the loan application process, coordinating between the borrower and financial institutions to ensure the information provided supports the approval of the loan application.
In real estate, a mill represents one-tenth of a cent. It is often used to express tax rates on a per-dollar basis of assessed valuation.
The Modified Accelerated Cost Recovery System (MACRS) is a method of depreciation used for income tax purposes in the United States. It allows for the accelerated depreciation of property over specified recovery periods.
Mortgage-Backed Bonds (MBBs) are a type of bond that is secured by a pool of mortgage loans, providing investors with regular interest payments derived from the underlying mortgage payments.
Net Spendable Income, also known as After-Tax Cash Flow, refers to the actual cash flow available to an investor after accounting for all operating expenses, debt service, and taxes.
Outstanding balance is the amount currently owed on a debt after accounting for payments already made toward the principal and interest. It is a key figure in managing financing and understanding one’s debt obligations.
P&I, or Principal and Interest, payments refer to the periodic payments made on a mortgage or loan that include both the loan principal and the interest accrued. These payments are common in various types of loans, including mortgages, auto loans, and personal loans.
Packed deals are mortgage loans that include excessive fees in the balance owed, which might be potentially illegal due to regulations in certain jurisdictions.
Real estate refers to land and anything attached to it, including buildings and other structures. It encompasses ownership, use, and transfer of physical property. Real estate business activities include accounting, appraisal, legal advising, brokerage, counseling, regulation, and financing.
The remaining balance, also referred to as the outstanding balance, is the amount of loan principal that has not yet been repaid, plus any accrued interest or fees.
A Real Estate Mortgage Investment Conduit (REMIC) is an entity used to pool mortgage loans and issue mortgage-backed securities, offering benefits such as tax advantages and liquidity to the mortgage market.
A Securitized Investment Vehicle (SIV) is a pool of investment assets that are combined and then split into smaller units to be sold to investors as securities.
Semiannual refers to an event or occurrence that happens twice a year, in other words, once every six months. In real estate and finance, semiannual terms often apply to payments, interest, and reporting periods.
Simple interest is a method of calculating the future value of an amount of money assuming that interest paid is not compounded. Interest is paid only on the principal.
The tax base refers to the collective value of property, income, or other taxable assets and activities that are subject to taxation. It is crucial in determining tax revenues as it forms the basis upon which tax rates are applied.
The Time Value of Money (TVM) is a financial concept that asserts money available at the present time is worth more than the same amount in the future due to its earning potential.
