A bullet loan is a type of loan in which the whole principal amount is paid back at the end of the loan term rather than through periodic payments. These loans typically have a short to medium-term duration, usually between 5 to 10 years, and can pose significant risk if the borrower cannot refinance or repay the loan principal as per the agreement.
A Cash-Out Refinance allows homeowners to replace their existing mortgage with a new, larger loan, providing them with the difference in cash.
A consolidation loan is a new loan that pays off more than one existing loan, generally providing easier repayment terms. It is often used to simplify multiple debts into a single monthly payment with a potentially lower interest rate.
Equity stripping involves reducing the equity in a property through refinancing or obtaining additional loans, typically used as a tactic to avoid asset seizure in cases of financial distress or by predatory lenders.
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.
The Interest Rate Reduction Refinance Loan (IRRRL) is a program offered by the Veterans Administration that allows eligible service members to refinance their existing VA loans to lower-interest, fixed-rate mortgages.
Interest rate risk refers to the potential variability in investment returns due to changes in interest rates. This risk can profoundly impact the market value of real estate investments and mortgage-backed securities.
Predatory lending refers to unfair, deceptive, or fraudulent practices of some lenders during the loan origination process. These practices take advantage of borrowers' lack of knowledge and often result in borrowers being burdened with loans they cannot afford, high interest rates, and excessive fees.
Prepayment penalty is a fee that some lenders impose on borrowers who pay off a loan early, helping the lender recover some of the interest they would have earned if the loan went the full term.
Pyramiding is an investment strategy that seeks to build a portfolio by reinvesting the proceeds from sales, or by refinancing existing properties into higher-valued properties using leverage.
A type of mortgage loan commonly used in Canada, where the amortization term for principal repayment extends over a long period, but the interest rate is set for a much shorter term. The interest rate is renegotiated, or the loan 'rolls over,' at the end of this shorter term based on current market conditions.
A second mortgage is a subordinated lien created by a mortgage loan that enhances financing options by reducing the cash down payment requirement during a property purchase or refinancing.
Secondary financing refers to an additional loan that is secured by a property that already has a primary loan (first mortgage) attached to it. This type of financing is often used to bridge financial gaps when purchasing or refinancing property.
