A

Abstract of title

A summary of the history of the ownership of a property, starting with the original grant, and including all subsequent encumbrances and conveyances

Acceleration clause

A loan provision that gives the lender the right to demand payment of the entire principal balance if the borrower fails to make a monthly payment OR If you default on a loan this clause allows the lender to speed up the rate in which the loan is paid off. This can include an entire balance to be paid off immediately. OR An acceleration clause is a clause contained in your mortgage which allows your lender to speed up the rate of your loan’s payment terms. The clause can also allow your lender to require immediate payment of your mortgage in full. Normally, this clause can only be activated if you were to default on your loan or if you were to otherwise violate your loan’s terms and conditions

Additional principal payment

Payment of more than the scheduled principal amount due in order to reduce the remaining balance on the loan. OR Whenever you make a monthly payment on your loan, a percentage of that payment goes towards principal and a percentage goes towards interest. If you want to reduce your balance and pay off your loan early, you can make an additional principal payment by sending additional money to be applied towards the principal of your loan when you make your monthly payment

Adjustable-rate mortgage (ARM)

A mortgage that allows the lender to adjust its interest rate at specific intervals based on changes in an established index OR A mortgage whose interest rate changes periodically based on the changes in a specified index. View a list of common indices. OR A mortgage loan with an interest rate that moves higher or lower periodically depending on the terms of your loan. If you take out an adjustable rate mortgage, also known as an ARM, you will have a lower initial interest rate than a fixed rate mortgage, but that interest rate could increase. For example, when taking out a 5-year ARM, your initial interest rate will be fixed for a five-year period and then can adjust each year after that. Whether or not your interest rate will increase or decrease is determined by the index that your lender uses to base their interest rates on. Most ARMs have what is called a cap, which will protect you in the event that interest rates increase substantially beyond a pre-determined rate level.

Adjustment date

The date on which the interest rate changes for an adjustable-rate mortgage (ARM OR The date on which the interest rate changes for an adjustable-rate mortgage (ARM) OR The adjustment date is the date on which your interest rate changes if you hold an adjustable-rate mortgage (also known as an ARM). Adjustment dates will vary from lender to lender and will be determined by the terms of your individual loan. The term can also be used to refer to a day that is set shortly after you make your purchase, in which you make a payment of accumulated interest in order to have your subsequent payments due on the first day of each month.

Adjustment period

The period of time between adjustment dates for an adjustable-rate mortgage (ARM). OR The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM). OR The adjustment period of your mortgage refers to how often your mortgage’s interest rate can be changed. Most adjustable rate mortgages have one-year adjustment periods; however, it is possible for adjustment periods to be monthly or semi-annually. These shorter adjustment periods tend to have much lower interest rates, but homeowners should be aware that these "teaser rates" can increase substantially in a short period of time

Affordability analysis

An analysis of a borrower's ability to make a home purchase. It takes into account assets, income, liabilities and the type of mortgage considered. In addition, it usually includes the geographic area of home desired and estimated closing costs

Amenity

A feature of real property that enhances its attractiveness and increases the occupant's pleasure although the feature is not essential to the property’s use. Sometimes amenities are considered the nonmonetary benefits gained from property ownership

Amortization

The gradual repayment of a debt by periodic installments or OR The repayment of a mortgage loan by installments with regular payments to cover the principal and interest A repayment method in which the amount you borrow is repaid gradually through regular monthly payments of principal and interest. During the first few years, most of each payment is applied toward the interest owed. During the final years of the loan, payment amounts are applied almost exclusively to the remaining principal.

Amortization schedule

A timetable that shows the amount of each payment applied to principal and interest, and shows the remaining balance after each payment is made. OR Your amortization schedule is a table that creates a timeline of your mortgage loan payment plan. This table shows you how your monthly payments are broken down and how much of each payment is going towards interest and how much is being applied towards the principal of your loan. By looking at your amortization table, you will see approximately how much you will owe at a given time up until the point where your loan is paid off

Amortization term

The amount of time required to retire a debt through periodic payments. The amortization term is often expressed as a number of months OR The amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.OR the amount of time required to amortize the loan. The amortization term is expressed as a number of months. For example, for a 3-year fixed-rate loan, the amortization term is 36 months.

Amortize

To repay a debt with regular payments that cover both principal and interest OR Payoff off a debt in installments which includes both principal and interest

Annual mortgagor statement

An annual report sent to the borrower that shows how much was paid in taxes and interest during the year, as well as any remaining loan balance OR When you are paying off a mortgage loan, you will receive an annual mortgagor statement at the end of each year. This report outlines how much money you have paid towards principal, interest and taxes during that year. This report will also show you the balance that is owed on your mortgage at that time.

Annual percentage rate (APR)

The cost of a mortgage stated as a yearly effective interest rate. It includes such items as interest, mortgage insurance, and any loan origination fees and points. Disclosure of the APR is required by the Truth-In-Lending Law. OR The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (points). OR The Annual Percentage Rate (APR) is a yearly rate of interest that includes all of the fees and expenses paid to acquire the loan. A term used in the Truth-in-Lending Act to represent the percentage relationship of the total finance charge to the amount of the loan. OR Annual percentage rate is required by law to be quoted by every firm involved in the business of advancing credit or lending money. The annual percentage rate be only one of a number of interest rates you may see quoted. It is also likely to be the highest of them

Application

A standardized form used to apply for a loan and to record relevant facts concerning a prospective borrower and the proposed property OR A form, commonly referred to as a 1003 form, used to apply for a mortgage and to provide information regarding a prospective mortgagor and the proposed security OR An initial written statement of personal and financial information required for an evaluation of creditworthiness. A loan application is the form that you fill out when you are applying for a loan. Loan applications can be filled out using the traditional pen and paper method or you can fill out your loan application online via the Internet. When filling out a loan application, you’ll need to answer personal questions about things like your bank account information, work history, earnings history, residence history and other questions pertaining to your financial stability

Appraisal

A written analysis of the estimated value of a property. Usually prepared by a qualified appraiser OR A written analysis of the estimated value of a property prepared by a qualified appraiser OR An estimate of the value of property, made by a professional appraiser OR A document that gives an estimate of a property's fair market value. An appraisal is generally required before approval is granted for a home loan to ensure that the amount of the home loan reflects the value of the property OR An appraisal is a tool that is used to estimate the value of a property and is most often used in regards to real estate transactions. When applying for a mortgage, your lender will most likely require you to obtain an appraisal before they will approve your loan. When obtaining an appraisal for a property you are interested in purchasing, you should work with a certified, licensed professional who is familiar with the area you are purchasing a home in

Appraised value

An appraiser's opinion of a property's fair market value. Typically based on market conditions, experience, and detailed analysis of the property OR The estimate of the value of property (including real estate property) that is being used as security for a loan. OR The appraised value of a property is an appraiser’s estimation of a property’s fair market value. This appraised value is determined by the appraisal process, which factors in things like the condition of the property you are having appraised and comparable sales in the area of the home. In order to be approved for a mortgage, the appraised value of the home you are purchasing must come in at or above the amount of the mortgage you are applying for.

Appraiser

A person qualified by training and experience to estimate the value of real or personal property OR A person qualified by education, training, and experience to estimate the value of real property and personal property OR An appraiser is a professional who can estimate a property’s fair market value. Good appraisers are qualified through extensive training and years of experience. When hiring an appraiser, make sure that the appraiser you are working with is licensed and certified in order to ensure that you will be working with a highly-qualified individual

Appreciation

An increase in the value of property due to changes in market conditions, inflation, physical improvement or other causes. The opposite of depreciation. OR The increase in the value of property caused by economic factors such as supply and demand, market conditions (such as consumer and business confidence) and inflation OR The term “appreciation” refers to the increase in a property’s value over a period of time. This increase can be caused by changes in the market, inflation rates, area growth and development, and other various factors. Appreciation is what makes real estate a commonly sound investment. Different areas and regions will experience different rates of appreciation

Assessed value

The value placed on a property by a public tax assessor for property tax purposes OR When your tax assessor places a value on your property for the purpose of determining your property taxes, the value is referred to as your assessed value. It is not uncommon for a property’s assessed value to come in below the actual fair market value of the property. Because of this, a property’s assessed value cannot be treated as an accurate appraisal

Assessment

The process of placing a value on property for the purpose of taxation. May also refer to a special payment due to a municipality or association. OR An assessment is a value that is placed on your property for the purpose of determining the amount of your property taxes. The county assessor is usually the governing agency that will determine your assessment. The term can also be used to refer to a charge that could be placed against your property for local improvements like sewer repair or street improvements

Assignment

The transfer of a right or contract from one person to another OR The transfer of a mortgage from one person to another OR In relation to receivables, it means the legal action of transfer of receivables from one person to another. In relation to a mortgage, it would mean the transfer of a mortgage by the mortgagee (borrower and occupier) to another person OR Assignment is the transaction by which the right of ownership to an asset is transferred from one person to another.

Assumable mortgage

A mortgage that can be taken over by the buyer when a home is sold with no change in loan terms OR A mortgage that can be taken over ("assumed") by the buyer when a home is sold OR Is a mortgage loan which can be assumed by a new buyer. Generally, the new owner must pass a credit approval process OR An assumable mortgage is a mortgage that can be transferred from the current owner of a home to the buyer. For example, if you have an assumable mortgage and interest rates are currently significantly higher than when you had purchased your home, you can entice buyers with the fact that your low interest rate is assumable. When a buyer wants to assume a mortgage, they will need to meet the mortgage lender’s requirements in order to qualify.

Assumption

The transfer of the seller’s existing loan to the buyer. OR The transfer of the seller's existing mortgage to the buyer OR The term assumption is used when a buyer of a property agrees to take over the mortgage payments on that property. For example, if you were to purchase a property using this method, instead of taking out an entirely new mortgage, you would become responsible for the payments of the current mortgage and the mortgage would be put into your name.

Assumption clause

A provision in an assumable mortgage that allows a buyer to "assume" responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property. (That is, there is no due-on-sale clause.) OR A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property OR The assumption clause is the provision of an assumable mortgage that allows a buyer to assume the mortgage of the seller when purchasing a home. If there is an assumption clause in your mortgage, you could have the buyer of your home take over the repayment of your existing mortgage rather than having to pay off your entire mortgage at closing

Assumption fee

The fee charged by a lender, and usually paid by the borrower, resulting from the assumption of an existing mortgage. OR The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage OR An assumption fee is the fee that is paid to the lender when a home buyer assumes the seller’s mortgage when purchasing a property. If you are purchasing a home and assuming the seller’s current mortgage, you will normally be required to pay this fee to the lender at the time of closing. The fee covers the processing costs incurred by the lender when they transfer the loan to the buyer.

Attorney-in-fact

One who holds a power of attorney to act on behalf of the grantor of the power. Such power may be general or limited in scope.

Adjustable Rate

An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly

Amortization Term

The amount of time required to amortize the loan. The amortization term is expressed as a number of months. For example, for a 15-year fixed-rate mortgage, the amortization term is 180 months.

Annual Percentage Rate (APR)

The cost of credit on a yearly basis, expressed as a percentage. Required to be disclosed by the lender under the Federal Truth in Lending Act, Regulation Z. Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. Does not include title insurance, appraisal, and credit report.

Application Fee

Fees that are paid upon application. An application fee may frequently include charges for a property appraisal ($200-$400) and a credit report ($30-50). See also definition of Closing Costs. OR A fee charged by the lender or broker for the loan application

Amount Financed

A required Truth in Lending Act disclosure for consumer loans. It is calculated by starting with the full amount borrowed (principal) and subtracting out the dollar amount of prepaid finance charges (finance charges the borrower is paying in advance)

Advanced EMI

Number of EMIs in the form of post dated cheques, paid out in advance at the time of disbursement of loan

Annual Reducing Balance of the Principal

In an annual "rest", the EMIs are calculated on an annual basis. The interest is calculated on the outstanding principal at the beginning of every year. Once the interest is calculated at the rate charged to the customer for the entire year it is deducted from the EMIs received during the year. The balance EMI is taken as principal repaid during the year and this is deducted from the opening balance of principal of the current year to arrive at the opening balance of principal for the next year. Thus the component of interest in the EMI is higher for the first few years and later on the component of principal increases and the interest keeps reducing year after year

Approved Plans

This refers to the plans of the building that is approved by the respective municipal corporation. This is a drawing of the layout of the project and the layout of the flats. This document is an important document as this document can establish any illegal constructions that may have taken place

Acceleration

Generally refers to the underlying covenant in revolving assets securitisation and future flows securitisation that the repayment of principal (amortization) to the investors in a program will be accelerated upon the happening of certain events, normally events such as a fall in the degree of over-collateralisation, under-performance events, etc

Aging

Is the concept which assumes that newly issued mortgages tend to prepay slower than mortgages which are older or seasoned. This aging refers to the underlying collateral and not the securities created upon that collateral

Accrue

To accumulate interest charges

Agreement of sale

Otherwise known as a sales or purchase agreement, this agreement basically states that the seller is selling and the buyer is buying under a specified set of terms. Both parties would then sign the auto loan contract.

Arrears

An overdue amount that has not yet been paid

Annual rest

Annual rest is the basis for the kind of appropriation by which the EMI is collected from the borrower every month and the appropriation towards interest and principal is made at the end of the financial year.

Acceptance Letter

Acceptance letter is the letter that a borrower or applicant provides on reading the terms of the issue; and communicate his willingness to accept the loan by way of an acceptance letter within a particular time frame which varies between 1-3 months from the date of the sanction letter and also pay the requisite administrative fee.

Advance EMI

Advanced EMI is the number of equated monthly installments in the form of post dated cheques, paid out in advance at the time of disbursement of loan.

Administrative Fee

Administrative fee is a one time fee; generally non-refundable; payable before the loan is disbursed. Rates may vary from 1-2% of the loan amount. It is an unavoidable pay out by which bank or HFC can make money of you.

B

Borrower

The person who is borrowing money or receiving credit under a Loan Agreement.

Bad Debt

A debt that is not collectible and is therefore worthless to the creditor

Balance Sheet

Financial statement presenting measures of the assets, liabilities and owner's equity or net worth of business firm or nonprofit organization as of a specific moment in time OR A financial statement that shows assets, liabilities, and net worth as of a specific date OR A financial statement in table form that shows assets, liabilities, and net worth as of a specific date OR A statement of a person or company of net assets, liabilities and equity.

Bridging Finance

A short term loan often a short term home loan which is used to cover a finance gap between the purchase of a new property and the sale of an existing property. Higher interest rates are usually charged for this form of finance.

Business Plan

A document that describes an organization's current status and plans for several years into the future. It generally projects future opportunities for the organization and maps the financial, operations, marketing and organizational strategies that will enable the organization to achieve its goals

Backup contract

A contract to buy property that becomes effective if a prior contract fails to be agreed upon

Balloon mortgage

A mortgage that has equal periodic monthly payments that will amortize it over a stated term but that requires a single, usually large, lump sum payment to be due at the end of an earlier specified term OR A mortgage that has level monthly payments that will amortize it over a stated term but that provides for a lump sum payment to be due at the end of an earlier specified term

Balloon payment

The final payment that is made at the maturity date of a balloon mortgage and pays the loan in full or A lump sum payment for the unpaid balance of the loan. OR A scheduled payment due at the end of a loan term that is substantially greater than the regular monthly payments. This may be a very large payment. It is designed to occur when the regular payments do not pay off all interest and principal owing (not fully amortizing) on the loan over the term of the loan. OR A large loan repayment, usually made at the end of a loan term.

Bankrupt

A person, company, or corporation that, through formal court proceeding, is relieved from the payment of all debts after the surrender of some or all assets to a court-appointed trustee OR A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee

Beneficiary

The person designated to receive the benefits resulting from certain acts OR The person designated to receive the income from a trust, estate, or a deed of trust.

Bequeath

To transfer personal property through a will or last testament. Compare with devise

Blanket mortgage

A blanket mortgage is a loan that covers more than one property under the same mortgage loan. Blanket mortgages cover all real estate properties of the borrower, including present and future properties. Land developers and real estate investors tend to use blanket mortgages when they are dividing and developing land

Bona fide

Something that is sincere, in good faith, and without fraud. For example, a bona fide offer is a sincere offer made at fair market value, in good faith with no intent of deceit.

Broker

A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them OR A broker is a professional that brings two parties together and negotiates and arranges contracts between them. These professionals usually charge a fee for their services or work on a commission basis. When you arrange a loan through a broker, the broker is not the one lending you the money; rather, they are working as an intermediary between you and the lender.

Basis point

A basis point is 1/100th of a percentage point. For example, a fee calculated as 50 basis points of a loan amount of Rs. 100,000 would be 0.50% or Rs.500

Built up Area

BUA, over and above the carpet area, would include the space covered by the thickness of the inner and outer walls of the flat.

Bank Interest Rates

Banks change the rates of interest they offer to customers for two basic reasons. When the Monetary Policy Committee changes base rate, bank interest rates will usually, though not always, be changed to reflect the increase or decrease in base rate.

Bank Overdraft - Overdraft Charge

You have a bank overdraft when the amount of money withdrawn from a bank account is greater than the amount actually available in the account. This sum of money - the excess withdrawal, is known as an overdraft and the bank account is said to be 'overdrawn'

Base Rate

Base rate, sometimes referred to as repo rate, is the minimum rate at which banks are prepared to lend money - it acts as the benchmark for other interest rates, including personal loans and mortgages

Banker´s Lien

The right of a bank to retain a customer's securities until a liability to the bank is discharged

Buyer´s Agent

A person who acts on behalf of a buyer to find and negotiate the purchase of properties. A Buyer's Agent will usually charge a fee (a percentage of the purchase price) for the provision of these services.

Balance Outstanding

The balance outstanding is the term used by the financial industry to describe the sum(s) that are still owed on a lending account or a product such as a loan, credit card or a mortgage. So, for example, if you have a mortgage then, at any given time during the life of the loan, you will have a balance outstanding on it? This will be the money that you still owe to your lender. You will usually receive a formal record of this outstanding balance in your annual mortgage statement. In some cases, the balance outstanding may be calculated to include any interest that will be repaid during the course of a loan.

Balance Transfer

A balance transfer occurs when you move the balance from one financial product to a different one.

Black Listed

In the financial industry black listed is a term used to describe individuals or businesses that have a poor financial history. They may have such as bad track record that they may be refused credit products on these grounds. That is to say that they have an impaired credit record and may find it difficult to take out loans and other financial products on this basis.

C

Collateral

Assets pledged to secure the repayment of a loan OR An asset that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract. OR Property offered to support a loan that can be seized if you default on your payments. Car and/or a house would be a good example. OR When you take out a loan, the collateral is the property that secures the loan. With a mortgage, the collateral is your home and with a car loan, the collateral is the car. If payments on a loan aren’t made, the collateral can be repossessed or foreclosed on by the lender according to the terms of the loan.

Cash-out refinance

A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.

Certificate of title

When you purchase a home, a title company or an attorney will be hired to research and ensure that the title to the property that you are purchasing is legally and rightfully held by the seller and that the title is free and clear of any liens and encumbrances (except, perhaps, any liens due to loans that will be paid at closing). Once the company verifies this information, they will issue a certificate of title.

Chain of title

A history of all documents, including conveyances and encumbrances, that affect title to a parcel of real property, starting with the earliest existing document and ending with the most recent. OR A chain of title shows you, in chronological order, the history of all of the documents that are related to the transfer of ownership of a piece of property. The chain of title is used in order to establish that the current owner of the property holds rightful title and it can usually be traced back to when the United States received rights to the property.

Change frequency

Term sometimes used to describe the frequency of payment or interest rate changes in an adjustable-rate mortgage (ARM). OR The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).

Clear title

A title that is free of clouds, liens, disputed interests or legal questions as to ownership of the property OR When you have been given a clear title, it means that you have been given title to a property that is free of any liens and disputed interests and that there are no questions as to the ownership of the property. This means that the seller that you are purchasing the property from is the only one who holds any legal claim to the property whatsoever

Commission

The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a small percentage of the price of the property or amount borrowed. Sometimes called points OR The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a percentage of the price of the property or loan. OR When a real estate agent or broker finds and completes a sale, that individual is paid money by the seller for those services rendered

Compound interest

Interest that is paid on both the accumulated interest as well as the original principal.

Construction loan

A short-term, interim loan for financing the cost of building construction. The lender makes payments to the builder or contractor at periodic agreed upon intervals as the work progresses OR This is generally a short-term loan, but sometimes when the home is completed, the lender will convert the loan to a traditional mortgage. If the lender is not willing to convert the loan, you will either need to pay the loan in full or refinance the loan with another lender.

Conventional mortgage

A mortgage that is not insured or guaranteed by the federal government. Compare with government mortgage OR When you take out a mortgage from a commercial, non-governmental lender, it is usually referred to as a conventional mortgage. When you have a conventional mortgage it means that your mortgage is not insured by the federal government. Generally, conventional mortgage amounts cannot exceed 80 percent of your home’s appraised value

Convertibility clause

A provision in some adjustable-rate mortgages (ARMs) that allows the borrower to change the ARM to a fixed-rate mortgage at specified period within the term of the loan OR A provision in some adjustable-rate mortgages (ARMs) that allows the borrower to change the ARM to a fixed-rate mortgage at specified timeframes after loan origination

Convertible ARM

An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under certain conditions OR An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions

Cooperative (co-op)

A type of property ownership in which the residents of a multi-unit housing complex own shares in the corporation that owns the property, giving each resident the right to occupy a specific apartment

Co-ownership

Two or more people sharing ownership of a property. Forms of co-ownership include community property, joint tenancy, and tenancy in common

Credit

An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date OR Reputation for solvency and integrity entitling a person to be trusted in buying goods or borrowing money OR The provision of goods, services or land now on the basis that you pay a charge for them later, then is credit.

Credit bureau

An agency that keeps your credit record OR An organization that gathers consumer credit information. There are three major credit bureaus: Equifax, Experian, and Transunion

Credit history

A record of a person's debt history, including all open and fully repaid obligations. A credit history helps a lender to determine whether a potential borrower has a satisfactory history of repaying debts in a timely fashion OR a record of an individual's open and fully repaid debts. A credit history helps a lender determine whether a potential borrower has a history of repaying debts in a timely manner. OR The history of an individuals debt payment. Lenders use this information to gauge the ability of a potential borrower to repay a loan

Credit report

A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a potential borrower's creditworthiness. Also see merged credit report OR A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness. OR This is a report which is generated by a credit reporting agency (such as Trans Union, Experion or Equifax). It is supposed to show accurately the history of your on-time and late payments on mortgages, credit cards, rent, utilities, and other debts. It may also show how much you owe on your various debts and whether you have taken the maximum amount of credit available to you through credit card borrowing. Your credit reports are used, with other information, to generate a credit score that is supposed to reflect how good a credit risk you are. OR A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness OR A written report of your debt payment history that can be generated by one of the three credit reporting agencies, also known as credit bureaus. When you apply for credit, a lender will pull your credit report to review your creditworthiness and determine whether or not you can be approved for the loan

Creditor

A person or business who is owed money OR A person or institution who extends credit and to whom the obligation is payable. OR A party to whom money is owed.

Ceiling

The maximum allowable interest rate over the life of the loan of an adjustable rate mortgage.

Combined Loan to Value (CLTV)

The relationship between the unpaid principal balances of all the mortgages on a property and the property's appraised value. OR The unpaid principal balances of all the mortgages on a property (first and second usually) divided by the property's appraised value. OR If you have more than one mortgage out on your property, the amount of the two mortgage principals combined and divided by the appraised value of your home (or sales price if the sales price is less than the appraisal amount) is your combined loan to value, or CLTV

Credit Limit

The maximum amount that you can borrow under a home equity plan.

Completion certificate / Occupation Certificate

This is given by the municipal corporation to the developer. It is a very crucial document as this certificate is issued only after the developer completes all the required formalities. Some of these formalities include getting water connection and electricity connection for the project and the construction being completed as per the permissions given in the commencement certificate and the approved plans

Co-buyer

An individual who purchases an auto (property) jointly with a Buyer. This individual is jointly liable for repayment of the loan and has ownership rights in the property purchased.

Co-owner

A second owner of the auto (property).

Co-Borrower

A second person on the title of a loan. If your credit rating isn’t good enough to qualify you for a loan, a co-borrower can help you get the loan you need by co-signing for you. The co-borrower, sometimes referred to as a co-signer, would sign the promissory note with you and if you were to default on the loan, the loan would then become their responsibility

Capital Gain

You make a capital gain whenever you sell or get rid of a particular asset and you make a profit on your investment. So, if you have an investment and you cash it in then your capital gain in general terms will be the difference between what you paid for the investment and the sum you are given when you sell it ? i.e. the profit OR The monetary (financial) gain obtained when you seel an asset for more than you paid for it.

Capital Gains Tax

Capital gains tax is charged if you make in excess of a certain amount of profit when you sell something such as stocks and shares, your property, land or certain other items of value. Every individual has a capital gains tax allowance which allows them to earn up to a certain sum in profits before they have to pay the tax? but once profits exceed this allowance then they will be taxed on them OR A federal tax on the monetary gain made on the sale of an asset (excluding your own residence) bought and sold after September 1985

Capital Loss

If you look to sell an investment product that you have purchased some time in the past then you can expect one of the following three results. You could firstly potentially make a profit on your investment. Secondly, you might simply get back the money you paid for the investment in the first place. Thirdly, you might potentially make a loss on your investment. If you make a loss on your investment then you are said to have made a capital loss. This means that you will simply not get back as much money as you invested in the first place

Conveyance

A conveyance is the document attached to the process of transferring a title to a property from one owner to another. So, when you buy a new home, for example, you will need to hire a conveyance (usually your solicitor or a qualified expert) to make sure that you become the legal owner of your property and that all is OK. This is generally a question of making sure that everything runs smoothly in the transfer of the deeds from the existing owner of the property to you as the new owner

Certificate of Occupancy

As the name implies, the Certificate of Occupancy certifies that a home can be lived in. It is a requirement of most local government or shire councils that an occupancy certificate be issued prior to the purchaser of a home taking occupation.

Current Market Value

The current market value of a property is determined according the following standard: The price at which a willing but not anxious vendor would sell, and at which a willing but now anxious purchaser would buy. Theoretically, if someone bought the property at current market value as an investment, then decided to sell it again, they should be able to find someone else who is prepared to pay the same price in the same market, and so on.

Carpet area

The area of a room measured inside wall to inside wall including door jams. Column projections inside the rooms are not deductible while arriving at the carpet area; i.e. areas useable at any floor level as worked out in the plinth area minus the area occupied by the walls.

Certificate of title

The official document of title, showing ownership of the land described in it. The Certificate of Title describes the area and location of the land; it shows the registered proprietor (land owner) and all charges and other interest affecting the land.

Clear title

It is a property title which is free from any reasonable doubt and also free from all encumbrances.

Close relatives

A close relative according to Section 6 of the Companies Act is acceptable as guarantor. They may include any of the following:

  • Father, mother (including step mother);
  • Son (including step son), son's wife, son's son, son's son's wife, son's daughter, son's daughter's husband;
  • Daughter (including step daughter), daughter's husband, daughter's son, daughter's son's wife; daughter's daughter, daughter's daughter's husband,
  • Brother (including step brother), brother's wife;
  • Sister (including step sister), wife/husband and sister's husband

However for consideration of these relatives as guarantors for the loan they should comply with the age and other norms of the home loan provider.

Common areas

It is actually the covered area of the common spaces and areas meant for use by the occupants of the property. These areas may include staircase, lifts, ducts for sanitation, electrical and air conditioning areas etc. This area is generally divided proportionately in relation to the size of the apartment/property and charged accordingly.

Conveyancing

The process of legally transferring ownership of interest in land.

Contract

A legally binding agreement between two or more people. Contracts may be written, oral, partly written or partly oral or implied by a person's behavior. Contracts relating to land must be in writing.

Credit Appraisal

Every Housing Finance Company (HFC) has its own panel of credit appraisal officers who process your applications. Various factors are taken into account like income of the applicants, number of dependents, monthly expenditure, repayment capacity, employment history, number of years of service left over and other such factors, which affect the credit rating of the borrower. Proof of income is also verified for the purpose of loan approval. The time taken for receipt of such information is crucial since it will affects the duration required for a loan approval.

The loan officer will also request applicants to the branch for a credit interview.

Credit Limit

The maximum credit allowed to a Borrower on an account.

Credit Reference/Report

A report prepared by a credit reporting agency which sets out the credit history of a person. A Satisfactory Credit reference is often required by a lender before approving a loan.

Commitment Fee

Commitment fee is an interest, which is charged if you do not draw the sanctioned loan amount within a period of 6-7 months. The interest rate is usually about 1-2%.

D

Default

Failure to comply with the terms of a loan contract. If a borrower defaults on a loan, the lender may seize the collateral, liquidate (sell) it, and apply proceeds to the loan balance.

Deposit

With most house purchases the Deposit is the amount of money that is paid to secure the purchase of the house and on Settlement is treated as part payment of the purchase price. The Deposit is often payable to the real estate agent as the Vendor's agent. It is important to find out what paying a Deposit will commit you to, whether the Deposit is refundable and, if so, in what circumstances.

Documentation

Documentation is the papers or documents to be signed in connection with the loan at the HFC, i.e., the loan papers.

Down Payment

Housing Finance companies normally give loans up to 80-85% of the value of the property. Down payment is the balance that has to be paid by the buyer, as a payment before the loan applicant draws on the loan amount.

Debt

Amount owed to another OR an obligation to pay another.

Debt Service

The total amount of credit card, auto, mortgage or other debt upon which you must pay.

Delinquent

Failure to make Mortgage Loan payments on time.

Delinquent Loan

Delinquency - in financial terms - is used to describe the situation when you fall behind with loan repayments. So, if you have built up arrears in your loan repayment schedule or have not paid all your repayments in full then your loan will be described as being a delinquent loan

Delinquency

The failure of the borrower to make agreed upon loan payments when they are due OR A failure by a borrower to make timely mortgage payments under a loan agreement

Due Diligence

Refers to the task of carefully confirming all critical assumptions and facts presented by a borrower. This includes verifying sources of income, accuracy of financial statements, value of assets that will serve as collateral, the tax status of the borrower and any other material facts presented by the borrower

Debt-to-income ratio

A figure, expressed as a ratio, that compares the amount of recurring debt payments a borrower is obligated to make, to the amount of their income OR The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her gross monthly income.

Deed

A legal document that conveys title to real property

Depreciation

A decline in the value of real or personal property. The opposite of appreciation OR A non-cash writing-down of the cost of an asset over its useful life.

Disclosures

Information that must be given to consumers about their financial dealings

Down payment

The part of the purchase price of a property that the buyer pays in cash and does not finance with a loan. OR The difference between the purchase price and that portion of the purchase price being financed. Most lenders require the down payment to be paid from the buyer's own funds. Gifts from related parties are sometimes acceptable, and must be disclosed to the lender. OR The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage OR The portion of a home's purchase price which is paid in cash and is not part of the mortgage loan

Due on Sale

A clause in a mortgage agreement providing that, if the mortgagor (the borrower) sells, transfers, or, in some instances, encumbers the property, the mortgagee (the lender) has the right to demand the outstanding balance in full.

DSA (Direct Sales Associate)

An agency of the financier, which takes care of customer sales and service. Most car financiers do not have their own field sales force as their sales and service are handled by the agency. They are authorised by the financiers

Debt Consolidation

Debt consolidation is the process of bringing all debts together and then paying them through a single loan OR Debt Consolidation

Due date

The date in a given month that a loan payment is due.

Direct Debit

Direct debit is an arrangement made by you with your bank for certain payments to be made to a third party on specified dates. The direct debit amount may be fixed or variable and for different time periods. The third party, the receiver of funds, is responsible for organising the deduction from your account. However, your bank will repay you if it allows an incorrect payment to be made.

Daily Interest

If you have any kind of financial account where daily interest is applied then the interest will be calculated on a daily basis. If you have a savings account, for example, then the interest you will be paid by your account holder will be worked out on a daily basis. And, if you have a daily interest based mortgage, then the interest you owe will also be worked out on this kind of daily basis.

Deflation

Deflation is a term that is used to describe the particular economic situation when the prices for products and services in the general market drop. As such it is the opposite of inflation (when the prices of products and services rise). It shows the average rate of any decreases that are taking place at a given time. In a deflated economy this also generally means that spending and the levels of money in circulation in the economy will also decrease at the same time

Dependants

A dependant is an individual that completely relies on another individual for financial purposes. So, a dependant will have no means of supporting themselves financially ? they will be dependant on another individual for their financial support

Distressed Property

There are two primary definitions of distressed property that are used in the financial sector. The first one refers to the basic condition of a property. For example, if a property is in a bad condition, needs a lot of maintenance or repairs or is in a generally bad state then it may be referred to as being a distressed property. Some financial sectors also use the term to describe the situation that may arise if a consumer or business gets into financial difficulties with their mortgage or secured loan repayments. If the mortgage is not being repaid according to its terms and conditions then your lender has the right to have the property repossessed to recover their money. The same may apply if you get into sever financial difficulties with other loans. If these repossession proceedings are started then many lenders will refer to the property in question as a distressed property.

Debt Service Ratio (DSR)

The maximum of a loan applicant's weekly, fortnightly and monthly wage which will support loan repayments over the agreed loan term which is usually expressed as a percentage.

Debtor

Someone who owes money to someone else.

Disbursements

Miscellaneous fees and charged incurred during the conveyancing process including search fees and charges paid to Government Authorities

Discharge of Mortgage

A document signed by the lender and given to the borrower when a mortgage loan has been repaid in full

Duty (or Stamp Duty)

A State Government tax on financial transactions. For the purchase of real estate the duty is calculated according to the property value. The duty also applies to the amount of the mortgage.

E

Early Repayment Charge

The charge that may apply when a fixed interest rate is repaid before the end of it's fixed term.

Equity

The difference between the market value of a property used as security for a loan and the amount of the loan.

Establishment Charge

A fee paid by a Borrower, usually to a lender, to cover the costs of processing a loan application.

EMI

EMI or Equated Monthly Installment is the installment amount the borrower has to make towards repayment of his loan. The EMI comprises of both the principal and interest.

Encumbrance

Encumbrance is the document to ward off property litigation. It records details of transfer of ownership of a property in succession right to the current owner; which includes the date, the names of the parties involving the amount of consideration, the extent and schedule of the property. This certificate can be obtained from the sub registrar's office for a payment of fee from any previous year till date. This certificate is also helpful in establishing the events as to how and when the present owner came into possession of the property.

Exposure/Extent of loan

This is the exposure or declaration of asset/product against the value of which the loan amount is decided.

Earnest money

A deposit made by a purchaser of real estate to show that he or she is serious about buying the house OR Money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment

Electronic fund transfer (EFT) systems

A variety of systems and technologies for transferring funds electronically rather than by check. Method of transfer is not only highly secure, but also extremely efficient and easy to transact OR A technology for transferring funds electronically rather than by check.

Encroachment

A property improvement or obstruction that physically intrudes upon the property of another

Encumbrance

A claim against a property by another party which usually affects the ability to transfer ownership of the property OR An encumbrance (sometimes referred to, as an incumbrance) is a legal term of art for anything that affects or limits the title of a property, such as mortgages, leases, easements, liens, or restrictions. Also, those considered as potentially making the title defeasible are also encumbrances

Escrow

An agreement providing that certain instruments or property be deposited with a third party to be delivered upon the fulfillment or performance of a specified act or condition. Also refers to a special account that a lender uses to hold a borrower's monthly payments on property taxes and insurance

Escrow account

An account that is held by a lender or an escrow agent. Funds are placed into the account for a specific purpose. When the funds are needed for that purpose, they are paid out of the escrow account. When you have a mortgage, a certain amount of your payment normally goes into an escrow account, out of which your property taxes and insurance payments are made

Effective Interest Rate

The cost of credit on a yearly basis expressed as a percentage. Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. Useful in comparing loan programs with different rates and points

Effective Rate or Cost

When you are quoted an APR, the total amount of that APR is calculated assuming that you will keep the loan for the entire term of the loan. There is a very good chance that you will sell your home before the mortgage is paid off, and the effective rate or effective cost reflects the total cost of the loan over the number of years that you actually intend to hold it.

Escrow disbursements

The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due

EMI (Equated Monthly Installment)

A fixed amount you have to pay every month against the loan you have taken during the duration of your loan

Electronic funds transfer (EFT)

A process that allows either the lender or the borrower to transfer funds or payments electronically between respective bank accounts. OR The electronic transfer of funds from one account to another.

Encroachment

A property improvement or obstruction that physically intrudes upon the property of another

Encumbrance

An encumbrance is a claim or a right to property by a party that is not the property owner. Typical encumbrances include issues such as leases, mortgages, restrictive covenants or debts that are owing on the property, for example. An encumbrance may make it not possible to transfer title from the property owner to a new owner in certain instances if the encumbrance limits the property’s title in any way. It can also have a negative effect on the actual value of a property.

Estate

The nature and extent of interest that an individual has in real property (degree of ownership). Also, the combined total of all real and personal property owned by an individual at the time of their death

F

Facility

Another term used to describe a loan or credit availability.

Flat Rate

Flat rate is the percentage representation of the amount of annual interest on the total loan amount.

Floating Rate

In floating rate, interest rate on the loan depends on the Prime Lending Rate (PLR) fixed by the RBI. Floating rate change usually happens as frequently as once in six months. A borrower benefits with the fall of the PLR, and loses if it rises. In case of a fall in interest rates your payments remain the same for every month and the HFC will refund some of your EMI cheques and effectively compensate you by reducing the tenure of the loan. However, the reverse happens if the PLR rises, much to your disadvantage.

Fixed rate

Fixed rate interest is one where the rate charged by the HFC on the loan amount is constant over the tenure of the loan. A fixed interest rate protects the borrower from a rise in home loan rates. While on the flip side, he may not benefit if the market rates were to fall.

First mortgage

A mortgage that is the primary lien against a property. It has priority over all other mortgages

First Charge

A first charge is a legal device that is often used by mortgage lenders to protect their rights in the event that anything goes wrong with your mortgage repayments. So, if you default on your mortgage repayments and your property has to be sold to repay debts etc., then the lender with the first charge right (usually your primary mortgage lender) on your mortgage/property will be given precedence over any other company with an interest in the property

Fixed installment

The monthly payment due on a mortgage loan which includes both principal and interest (Same as EMI)

Fixed Rate Loan

A loan where the interest rate does not change during the term of the loan OR When you have a fixed-rate loan, it means that the initial interest rate you agreed to when you took out the loan will remain the same over the life of the loan. With this type of loan, the payment amount of your principal and interest will never change. These loans are typically for 15 to 30 year terms

Foreclosure

The legal process by which a borrower in default under a mortgage is deprived of his interest in the secured property. This usually involves a forced public sale of the property with the proceeds applied to the outstanding debt.

Floating Rate of Interest

When one opts for a floating rate of interest, the interest rate on the loan may fluctuate depending on the Prime Lending Rate (PLR) fixed by the Reserve Bank. This change can happen as frequently as one in six months. If the PLR falls, the customer benefits and if it rises he suffers. However, in case of a fall the payments remain the same for every month. The finance company will refund some of the EMI cheques and effectively compensate the customer by reducing the tenure of the loan

Financial Advisor

A financial advisor is a sector expert that gives advice to consumers and/or businesses on all types of financial products and services. So, for example, if you are looking for a mortgage, then you could talk to a financial advisor to assess your options and to help get advice on the type of mortgage that might best suit your needs. They can also help you buy the products they recommend should you wish

Financial Year

A financial year is a given 12 month period that is generally used for company reporting, accounting, taxation and other financial-related purposes. There are technically two ways that a financial year can be applied as a rule. Firstly, companies often operate financial years as part of their overall reporting mechanisms that run from 1st April through to the 31st March in the following year. So, a company, for example, may publish results for the financial year ending March 2005

Freehold

Freehold (real property), a term used in real estate, where the land held in fee simple, as opposed to leasehold, which is land which is leased.

G

Guarantee

An agreement by which a person (guarantor) promises to meet the obligations of another person (Borrower) on Default. Lenders in some circumstances require a Guarantee of the Borrower's obligations under a Loan Agreement.

Guarantor for the loan

Any individual who has good income/net worth can be a guarantor for the loan. In case of non-resident Indians (NRI), the guarantors are to be close relatives as defined under Section 6 of the Companies Act.

Grant

A technical term used in deeds of conveyance of property to indicate a transfer

Guarantee mortgage

A home loan that is guaranteed by a third party. OR If you have a guarantee mortgage, it means that your mortgage is being guaranteed by a third party, such as a government institution. These loans are also known as government mortgages.

Grace Period

A period of time during which a loan payment may be paid after its due date but not incur a late penalty. Such late payments may be reported on your credit report

Gross Income

For qualifying purposes, the income of the borrower before taxes or expenses are deducted

General Lien

The lender's right to retain property until a debt is paid. Includes Poser of Attorney and other clauses generally contained in lender security forms

H

Home Loan

A home loan requires you to pledge your home as the lender's security for the repayment of your loan. The lender agrees to hold the title or deed to your property until you have paid back your loan plus interest

Hazard insurance

Form of insurance that compensates for physical damage to a property from fires, storms or other hazards OR A form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm and the like

Home equity loan

A home equity loan is a fixed or adjustable rate mortgage that allows you to borrow against the equity in your home. The amount of equity in your home is determined by how much your home is worth versus how much money you still owe on the home. In certain circumstances, the interest on your home equity loan may be tax deductible.

I

Inspection of property

Inspection of property intended for purchase or construction is done at regular intervals, both before and after disbursement of the loan. Post sanction inspection of the property is done at each stage of the disbursement to ensure that the margin money is invested by the borrower and the progress of work is as per schedule.

Interest

An amount payable by the Borrower to the lender's recompense for making the loan. Usually a Borrower can choose to borrow on a fixed interest rate or a floating interest rate.

Interest-Only Loan Agreement

A Loan Agreement under which the Borrower makes no Principal repayments during the Term, but must repay the whole of the Principal on loan maturity. During the term of an Interest-Only Loan Agreement payments of the amount of interest accruing on the loan will usually be required at regular intervals.

Interest Tax

Housing Finance companies have to pay a tax on the interest income they receive. One should check whether the interest rates quoted include interest tax or not. This tax is normally about 2% of the interest rates charged. Interest tax has been abolished from April, 2000.

Interest Rate

Rate at which the home loan providers charge interest for the loan amount.

IRR

Internal Rate of Return (IRR) is the rate at which the lender accounts for interest.

Inflation

An increase in the amount of money or credit available relative to the amount of goods or services available. Inflation causes an increase in the general price level of goods and services. Over prolonged periods inflation can reduce the purchasing power of a dollar, making it worth less.

Initial interest rate

The original starting interest rate of a loan at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). Sometimes called a teaser rate. OR Sometimes referred to as a teaser rate, this is the beginning interest rate that your adjustable-rate mortgage starts with the day your loan is approved. This rate will be fixed for a certain period of time, but your rate will then adjust according to the index and margin that your lender uses

Installment

A regularly scheduled periodic payment that a borrower agrees to make to a lender.

Installment loan

A loan that has predetermined, equal payments due until the loan has been paid in full.

Interest rate

The rate of interest used to calculate the monthly payment due OR The periodic charge, expressed as a percentage, for use of credit OR The interest rate is a part of the annual percentage rate (APR) equation. Interest is the annual rate of return that the lender receives on the Principal of the loan. OR The percentage yearly cost to borrow money. When you invest money, the interest rate is the money that you make from your investment. The interest rates on loans can be fixed or adjustable, meaning that the interest can stay the same throughout the term of the loan or can go up or down according to an index.

Interest accrual rate

The rate at which interest accrues on a mortgage. Usually, it is also the rate used to calculate the monthly payments.

Interest rate ceiling

The maximum interest rate for an adjustable-rate mortgage (ARM), as specified in the mortgage loan note.

Institutional lender

a lender which makes a substantial number of real estate loans, such as banks, savings and loan associations, and insurance companies

Introductory Rate

Also called a teaser rate, this is the interest rate that you will pay at the beginning of your adjustable-rate mortgage. This rate will stay fixed for a set period of time, usually for one year, and will then adjust according to the index that your lender uses in addition to the margin that they add"

Income Multipliers

Income multipliers or multiples are part of the calculation tools that mortgage lenders use when they come to work out how much money you can take out for a mortgage. These multipliers use your salary (or salaries for joint applications) to work out the most you can borrow. This helps the lender make sure that they don’t allow you to borrow more than you can afford to repay. So, they minimize their risk and you make sure that you are borrowing a manageable sum.

Intermediaries

In the finance sector intermediaries are individuals or companies that can act as a middle-man between a consumer or a business and a financial company. So, for example, you might buy your mortgage through a mortgage broker rather than applying through the lender directly

Income Statement

A statement of income and expenditure for a period

Indemnification

Indemnification is a promise, usually as a contract provision, protecting one party from financial loss. This is sometimes stated as a requirement that one party "hold harmless" the other. Indemnification is a type of insurance, which protects one party at the expense of the other. Indemnification can either by direct payment or reimbursement for the loss. Indemnification clauses cannot usually be enforced for intentional tortious conduct of the protected party

Indemnity

Indemnity is a legal exemption from the penalties or liabilities incurred by any course of action. An insurance payout is often called an indemnity, or it can be insurance to avoid paying expenses in case of a lawsuit

Interest Rate Lock

When a lender guarantees to loan you money at a set interest rate, protecting you from potential rate increases. Rate locks are for a set period of time, usually not longer than 30 days, so you will want to make sure to close on your loan before the rate lock expires. A lender will normally charge you a fee to lock in an interest rate

J

Jeopardy

An element of risk or danger.

Joint Application

A joint application is an application to open or buy a financial product that is made by one or more people. This kind of application is usually made by couples or married people but can be extended to any pair or group of people in most cases. So, if you make a joint application for a mortgage, for example, with your spouse or partner then you will both be responsible to your lender for the repayment of your mortgage loan. The fact that you will be offering two incomes in this instance will increase your spending power and you will be able to borrow more than if you were applying for a single applicant mortgage.

Joint Income

The term joint income is most commonly used within the mortgage sector. It is used to describe the total income that can be used to calculate how much can be borrowed if more than one individual is applying for the mortgage. So, if you are applying for a mortgage with your spouse, partner or a friend then you can pool both your incomes to create a joint income for the lender to use in their calculations.

Joint Liability

Joint liability is a term used in the general lending industry to describe the responsibilities of a loan repayment schedule. If you have joint liability for a loan then more than one person will be responsible for making the repayments. So, for example, if you take out a mortgage with your partner then you will both have joint liability? You will both be held equally responsible for the mortgage repayments and it will be given in both your names. If one of you stops paying the mortgage then, as far as the lender is concerned, the responsibility for the full payment will still fall to the other party.

K

Khata, Chitti, Adangal

These are basic documents called by different names in different places indicating the ownership of property as entered in the register of the Government authorities.

Kicker

A payment sometimes required by a mortgage loan in addition to normal principal and interest.

L

Liabilities, Total liabilities

A person's financial obligations including both long-term and short-term debt, as well as any other amounts that are owed to others

Loss Reserves

That portion of a fund's earnings or permanent capital designated by the board of directors as a reserve against possible loan losses and, as such, unavailable for lending purposes. Generally accepted accounting principles governing for-profit and regulated financial institutions require that loan loss expense be deducted as an annual expense on an accrual basis and that the loan loss reserve be shown as a contra asset reducing loan assets. To date, no accounting convention has been established to govern loan loss reserve accounting for unregulated nonprofit institutions. The technical treatment is to establish the reserve through periodic charges against earnings, and actual losses, when and if incurred, and are charged against the reserve. For balance sheet purposes a loan loss reserve (should) be shown as a deduction from the loan portfolio to suggest that its true economic value should be reduced by the estimated loss exposure.

Land banking

The business of buying land that is not currently needed for use

Land contract

A property installment selling agreement whereby the purchaser may occupy and use the land, but no deed is given buy the seller until a specified part of the sales price has been paid

Late charge

The penalty a borrower must pay when a payment is made after the stated due date OR A penalty you will have to pay if you do not make your loan payment on time. This usually is calculated as a percentage of the payment amount or a minimum rupee amount, such as 5% of the late payment, or Rs. 500.

Leasehold estate

A way of holding title to a property wherein the mortgagor does not actually own the property, but instead has a long-term recorded lease on it

Lease-purchase mortgage loan

A creative financing option that allows low-income homebuyers to lease a home from a nonprofit organization with an option to buy. Each month's rent payment consists of principal, interest, taxes and insurance, plus an extra amount that is deposited into a savings account created for a down payment

Lessee

A person who signs a lease to get temporary use of property OR The person who signs a lead to have temporary use of a vehicle

Lessor

A company that provides temporary use of property usually in return for periodic payment

Lien

A legal claim against a property that must be paid off when the property is sold OR A claim (legal interest) against a home. Common types of liens include a mortgage, tax lien or judgment lien OR A security interest in property, such as an auto, to secure the payment of an obligation.

Lifetime cap

A provision of an ARM that limits the highest rate that can occur over the life of the loan

Lifetime payment cap

On an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the term of the loan

Lifetime interest rate cap

On an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease over the term of the loan

Listing agreement

An agreement between a real estate broker (agent) and a property owner employing the agent to find a buyer for the property

Loan

Borrowed money that is usually repaid with interest OR Money lent to a consumer to be repaid over a period of time

Loan conditions

Conditions imposed by a lender on a loan, which must be satisfied before the lender will release the funds

Loan contingency

A condition in a purchase contract that allows a buyer to back out of the contract if the buyer is unable to obtain a loan. The buyer must remove the loan contingency (agree to proceed with the transaction) within a specified amount of time, or withdraw from the contract

Loan origination

The process by which a mortgage lender creates a mortgage secured by real property

Loan-to-value (LTV) ratio

The relationship between the principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property. For example, a Rs150,000 home with a Rs120,000 mortgage has a loan-to-value ratio of 80 percent OR A ratio used to determine the amount of money a lender will loan based on the value of the auto. It is calculated by dividing the loan amount by the Retail Value or Manufacturer's Suggested Retail Price (MSRP).

Lock period

The amount of time that a lender will guarantee a loan's interest rate. Once you've locked in the interest rate on a loan, the lender will guarantee that rate for a certain period of time, usually for 30, 45 or 60 days

Lock-in

Written agreement in which a lender guarantees a specific interest rate if a loan closes within a set period of time. The lock-in may also specify the number of points to be paid at closing. Also called a rate lock, or rate commitment

Lender

A company or person that makes mortgage loans, such as a mortgage banker, credit union, bank, or savings and loan. Your lender's name will appear on your promissory note. OR The individual or organization that lends funds to a borrower with the understanding that those funds will be repaid, with interest, based on a clearly defined schedule. It can be a bank, credit union, or finance broker offering or referring the loan.

Lender Paid Compensation to Broker

This is also called the Yield Spread Premium. Fee which the lender pays to the mortgage broker for obtaining the loan for his client.

Loan Approval/Commitment

A lender's agreement to make a loan on particular terms, including interest rate, fees and charges

Loan Term / Loan Tenure

This is the length of the loan, usually broken down into months (24, 36, etc.). While it is true that the longer the "Loan Term", the lower the monthly payment; increasing the length of the loan to lower the monthly payment should be done with a great deal of caution as the total amount repaid will be higher due to interest accrued. It is calculated by dividing the sales price or appraised value of an auto by the loan amount.

Lending Rate

The interest charged by the financier on the amount financed

LPC (Loan Processing Charges)

Service charge collected by a financier.

Late fee

A charge assessed by a lender for payments received after a specific due date.

Late Payment

A late payment occurs when you fail to make a payment to a loan/credit agreement on time. The majority of loan products such as mortgages, loans, hire purchase arrangements and credit cards, for example, will have late payment clauses built into the terms and conditions of the agreement that you sign when you take out the product

Lien holder

The individual or company holding a security interest in collateral to ensure repayment of a loan

Loan balance

The amount owed on a loan after deducting the amount of payments made.

Legal Charge

A legal charge, sometimes called a legal mortgage, is a formal document that gives your lender certain rights over your property in return for the mortgage loan necessary for the property purchase. Basically, it allows them certain repossession rights if you do not meet the terms of your mortgage contract. The legal charge will be registered at The Land Registry by your lender to show the interest they have in your home

Loan Consolidation

Loan consolidation is a process that can be used if you have a lot of existing debts and want to make them more manageable. You can consolidate multiple debts into one loan with this kind of solution. A loan consolidation option allows you to bundle up all of your debts and package them together into one loan product with a view to cutting loan repayment costs and making repayment schedules easier

Lock In

There are two main definitions of lock in within the financial sector. You may come across the first if you apply for certain types of loan finance. When you get to the stage when your lender gives you a quote for the loan you want to take out then you may well be offered a lock in period. This will usually be measured in days and will generally only last a couple of months or so (i.e. 60 days). This lock in period allows you some time to make your mind up about whether to take the loan out or not. Basically it means that the lender will guarantee you the interest rate you have been quoted for a specific period of time after they have made the quotation during your application process. If you apply during this time then you will be given this quoted rate ? but it may not be available if you want to take out the loan lat

Lock-in periods

Lock-in periods are terms applied within the lending sector for loan agreements such as mortgages. If you have a lock-in period attached to your mortgage deal then you are committed to stay with that mortgage for the specified period of time set out by the lock-in clause. So, you can’t repay your mortgage without penalty during this period. If you want to repay early then you will be charged a penalty fee. Lock-in periods are usually attached to special deals and rates and may extend after the deal has finished

Land Tax

A State Government tax charged to the owners of any property over a stipulated value

Low Start Loan

A home loan where the initial repayments are low and increase over time

Lease-Purchase Mortgage Loan

A loan type that allows you to lease a home with the option of purchasing it at the end of the lease period. A portion of each month’s rent payment will be put into a savings account which will later be used as your down payment on the home. This option is generally used by people with a low income or with credit problems

Lifetime Rate Cap

When you have an adjustable rate mortgage, the lifetime rate cap is the maximum amount that your interest rate can go up or down over the life of the loan. For example, if your interest rate is 5 percent and the lifetime cap of your loan is 5 points, your interest rate will never exceed 10 percent

Loan Officer

A loan officer is a representative of the lending institution and will represent you when you are applying for a loan. It is the person that will help you select the loan that is right for you and will help you through the loan process and closing. Loan officers are also referred to as loan representatives and account executives

Loan Servicing

When you make your mortgage payments each month, the company you pay is the company that services your loan. This company will process your monthly payments, send you your monthly mortgage statements and will handle your escrow account and pay the expenses out of the account. If your loan is sold, the company servicing your loan may change and you will start sending your payments to a different company

Lease

A Contract under which the owner of a property (lessor or landlord) grants to another person (lessee or tenant) the right to exclusive possession of the property for an agreed period, usually in return for rent.

Legal scrutiny report

They are the documents pertaining to your property needs which are to be scrutinized by legal personnel of the HFC to ensure that you are buying a property that is clear and marketable. It can be considered as the first criteria to be taken care of, so that the transaction is proper and the property can be passed onto your legal heirs.

License for construction

This is a permission to construct or an authorization in writing issued along with the sanctioned plan.

Loan Agreement

The Contract between the lender and the Borrower that sets out the loan terms and conditions. These will include Principal amount, repayment obligations, Interest rate and the security required. It is important to read the Loan Agreement carefully, and get legal and financial advice, before it is entered into.

Loan to Value Ratio (LVR)

The ratio obtained by dividing the amount of the loan by the value of that property which is charged as security for the loan. For example, if Rs160, 000 is borrowed and the security property is valued at Rs$200,000, the LVR would be 80%.

M

Margin amount

Margin amount is the difference in the total cost of the project and the loan amount sanctioned.

Margin amount in case of

  • Construction of a house has to be invested by the borrower of the property prior to the release of the loan amount.
  • Purchase of a house, then the loan amount will be released on the day of registration of the property and the margin money has to be invested by the borrower prior to the release.
  • Purchase of flats, the release will be made only on investment of the margin money by the borrower.

Marketable title

Marketable title is the title to the property that is clear and the person has the right and capacity to transfer the same.

Market value

It is the value of the property as per the prevailing market rates.

Mortgage

A security over property given to the lender for the repayment of Principal and the payment of Interest on the loan. A Mortgage over land is registered on the Certificate of Title to that land.

Market Rate

The rate of interest a company must pay to borrow funds currently. Program-related investments generally are offered at below market rates or at no interest rate.

Maintenance

Activities required to compensate for wear and tear on a property

Maturity

The date on which the principal balance of a financial instrument becomes due and payable

Maximum financing

Usually, a loan amount that is within 5 percent of the highest loan-to-value (LTV) percentage allowed for a specific product

Merged credit report

A credit report that contains information from at least three credit repositories. Any duplicate entries are combined to provide a concise summary of a your credit

Monetary policy

Actions by the Federal Reserve System to influence the cost and availability of credit, with the goals of promoting economic growth, full employment, price stability and balanced trade with other countries

Mortgage broker

An individual or company that brings borrowers and lenders together for the purpose of loan origination. Mortgage brokers usually charge a fee or commission for their services OR A person or company that obtains a mortgage loan for the borrower from another lender. A mortgage broker will not always be representing the borrower and will not necessarily be looking after the borrower's best interests

Mortgagee

The lender in a mortgage loan agreement OR A mortgage is a promise in which you agree to put up your home as security for a loan. The mortgage is the instrument which secures the Promissory Note, in which you promise to repay the loan at a certain date. The mortgage document allows the lender to force a sale of your home (foreclosure) if, for example, you fail to make payments, to pay property taxes or insurance, or keep other promises. In some states the mortgage document is called a "deed of trust." Refer to your copy of The Complete Guide to Your Real Estate Closing for full details of these two documents.

Mortgage insurance

A contract that insures the lender against loss caused by a borrower's default on a government mortgage or conventional mortgage. Mortgage insurance can be issued by a private company (private mortgage insurance or PMI) or by a government agency such as the Federal Housing Administration (FHA). See also private mortgage insurance

Mortgage life insurance

A type of term life insurance often bought by mortgagors. In the event that the borrower dies while the policy is in force, the debt is automatically repaid by insurance proceeds. Not to be confused with mortgage insurance

Mortgage Insurance (PMI or MI)

Insurance that may be required when a loan is greater than 80% of the value of the home. This insurance protects the lender in the event a borrower fails to make his or her loan payments. The borrower ordinarily pays the cost of MI or PMI, in the form of monthly premiums added to the mortgage payments

Mortgagor

The borrower in a mortgage agreement. The mortgagor pledges property

Minimum Payment

The minimum amount that you must pay, usually monthly, on a home equity loan or line of credit. In some plans, the minimum payment may be "interest only," (simple interest). In other plans, the minimum payment may include principal and interest (amortized).

Mortgage Loan

A loan which utilizes real estate as security or collateral to provide for repayment should you default on the terms of your loan. The mortgage or Deed of Trust is your agreement to pledge your home or other real estate as security

Mediation

A process of dispute resolution in which an impartial third party, a mediator, intervenes in a dispute with the consent of the disputing parties and helps them negotiate an agreement. The role of the mediator is to assist the disputants define and clarify issues, help reduce obstacles to communication, explore possible solutions, and reach a mutually satisfactory agreement.

Monthly Reducing Balance of the Principal

Monthly Reducing Balance of Principal is same as annual reducing balance except that the balance is calculated on a monthly basis and the EMI is broken up every month to arrive at the opening balance of principal for the next month

Market Value

In general financial terms market value is used to describe the price that a buyer is willing to pay for an asset/property in an open market. In property terms the market value of a property is generally described as being the highest amount that a property might be purchased for and the lowest amount that its seller would accept for it. Given that a fair amount of negotiation goes on in the property market then there is no guarantee that a property will always sell at its market value. Sometimes properties sell above market value and sometimes they sell below it.

Maximum Loan Value Ratio (MLVR)

The Maximum Loan Value Ratio is the amount you can borrow expressed as a percentage of the valuation of the security (usually the property you are buying

Minimum Loan Amount

The minimum amount that can be borrowed

Minimum Lump Sum Payment

The minimum amount that can be repaid as a lump sum

Mortgage Manager

Mortgage Managers are lending specialists who arrange funding for home and investment loans. Unlike banks, building societies and credit unions, mortgage managers do not have a base of customer deposits with which to fund their loans, instead they source their funds via a process known as securitization

Mortgage Offset Account

An offset account is a savings account linked to a loan account. No interest is paid to the offset account but instead the balance of your offset account is deducted from your loan account before the interest on your home loan is calculated. Therefore less interest is charged to your loan

Mortgage Originator

Originators initiate or generate mortgage applications for the mortgage trust. Put simply they "pool" a group of mortgages which can then be sold on to investors as an income producing asset. Originators are responsible for receiving applications for finance, assessing credit and monitoring the transaction through to settlement. They may then appoint a Mortgage Manager or may take on the management of the mortgage themselves

Monthly Arm Definition

An adjustable-rate mortgage that recalculates a loan holders interest rate on a monthly basis. Since you are the one taking most of the risk with this type of loan and the lender only has to commit to the interest rate on a monthly basis, the interest rate is usually lower than the interest rates offered on other ARM rates and fixed-rate mortgages

N

Negative Covenants

Statements of actions or events of the borrower must prevent from occurring or existing, for example, additional borrowing without the lender's consent.

Net Working Capital

Current assets minus current liabilities.

Net Worth (Fund Balance in nonprofit. organizations)

Total assets minus total liabilities. Aggregate net value of the organization. OR The total value of all of a person's or company's assets, minus all liabilities.

National tenant

A lessee with a presence and established reputation in most of the United States. These tenants are typically well-known and usually have better credit than local tenants

Negative amortization

A gradual increase in mortgage debt that occurs when the periodic monthly payment is not sufficient to cover the monthly principal and interest due. The amount of the deficit is added to the remaining principal balance to create negative amortization.

Net Cash Flow

The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense, which includes principal, interest, taxes, and insurance. / The total value of all of a person's or company's assets, minus all liabilities.

New Home Sales

Reports the number of new single-family homes sold, expressed on an annual basis. Can be combined with Existing Home Sales to determine the total volume of home sales, a strong predictor of future national mortgage origination volume. Frequency: monthly. Source: Commerce Department.

No cash-out refinance

A refinance agreement in which the new loan amount is limited to the sum of the following:

  • remaining balance of the existing first mortgage.
  • closing costs (including prepaid items),
  • points,
  • the amount required to satisfy any mortgage liens that are more than one year old (if he borrower chooses to satisfy them),
  • any other funds for the borrower's use (as long as the amount does not exceed 1 percent of the principal amount of the new mortgage).

Non-liquid assets

Any assets that cannot easily be converted into cash

Nonrecurring closing costs

One-time-only fees for items including an appraisal, loan points, credit report, title insurance, and home inspection

Note

Written legal document that obligates a borrower to repay a loan at a stated interest rate during a specified time period. OR A written agreement containing a promise of the signer to pay to a named person, or order, or bearer a definite sum of money at a specified date or on demand.

Note rate

The interest rate stated on a mortgage note. Also called nominal rate or face interest rate

Notice of default

Formal written notice to a borrower that a default on a loan has occurred and that legal action may be taken.

Net Effective Income

The gross income of the borrower, minus the percentage removed for federal and/or state income tax

Negative Equity

Negative equity is the term used to describe a situation where the mortgage you owe is greater than the actual value of your property on the market

Net Income

Your net income is the income you earn after deductions have been made. So, it is the money you have to spend every month once you have had tax and any other relevant deductions taken out of your salary

Net Monthly Repayment

A net monthly repayment is the standard payment that you must make every month to a lender in order to repay a loan that you have taken out to the schedule you agreed to in the first place. It is generally usually called a net payment because any tax relief that can be applied to it has already been taken into consideration.

No Credit History

Individuals who have no previous or existing credit agreements in place may find it difficult to obtain credit. This is because they have no credit history and lenders are unable to assess whether they are reliable payers or a good risk. Self-employed individuals may also find it difficult to obtain credit, as there is a higher risk of non-payment due to annual earnings being non-guaranteed. Some lenders do offer products designed to 'build your credit rating', and although their terms may not be as attractive as those of the products offered to prime applicants, they do offer individuals the chance of building a credit history.

Non- Status

Non status is a term used in the credit and general financial industry. It is used to describe a poor credit rating for an individual or a business. Certain individuals may also be classified as non status even if they have a good credit record? This can occur if you can’t prove your income to lender standards because you are self-employed, for example. Non status can also be known as bad credit or sub-prime credit.

Not in Employment

If you are classified as being not in employment then you will either be unemployed or you will not be in receipt of what is termed a regular salary. You could, however, be claiming benefits from the state and still be classified as not in employment. The term is not generally used to describe the self-employed.

Notice of correction

A notice of correction (NOC) is something that you can add to your credit history if you believe that some of the information held on it gives an incomplete/no explanation of your situation. You are basically allowed up to 200 words to explain or clarify something that appears on this history if you think that it might cause you problems with lenders that view it.

Net effective income

The gross income of the borrower, minus the percentage removed for federal and/or state income tax.

Non-prime lender

A lending institution that loans money to individuals with a financially challenged credit history. The risk factor on this type of loan is greater, thus resulting in higher interest rates in order to compensate for the high risk factor.

Negative Gearing

Where the return on an investment is insufficient to meet the interest costs of the loan used to fund the investment. The amount can usually be claimed as a tax deduction

O

Obligation of the borrower

The Obligation of the borrower in terms of the agreement is to keep up the schedule of repayment, periodic deposit of the post dated cheques and to keep the property free from encumbrance.

Obligee

A person or company whose favor an obligation is entered into.

Obligor

A person or company who has engaged to perform some obligation

Occupancy rate

Percentage of currently rented units in a building, neighborhood, complex, or city.

Offer

A buyer's expression of willingness to purchase a property at the seller's specified price.

Open-end lease

A lease which may involve a balloon payment based on the value of the property when it is returned.

Original Principal Balance

Total amount of principal owed on a loan before any payments are made.

Origination Fee

A fee paid to a lender or broker for arranging a loan. The origination fee is usually stated in the form of points. One point is equal to one percent of the total loan amount. Also called a loan origination fee.

Owner financing

A real property purchase transaction in which the seller provides the financing.

Obligation of the borrower

The borrower in terms of the agreement will be obligated to keep up the schedule of repayment, to deposit the post dated cheques periodically and to keep the property free from encumbrance

Open-End Loan

A loan that permits the borrower to draw money from time to time up to a credit limit. A home equity line of credit (HELOC) is an open-end loan secured by a home

Obligatory Insurance

An insurance policy that has to be taken out as a condition of obtaining a loan. Normally conditional insurances must be taken out via the lender's agency so that they benefit from any resultant commission.

Order of Discharge

Order of discharge is a legal term used to describe the point in time when a bankruptcy case is ended, thus resulting in the discharge (i.e. cancellation) of any outstanding debts that the individual in question may have.

Outgoings

Your outgoings are those financial commitments that you have to make/pay for on a regular basis. They are basically the money you have to/are committed to spend in order to live from the salary you earn.

Outstanding Balance

In the financial sector the term outstanding balance is usually used to describe the sum of money that is owed on a financial account and/or product at a given time. So, for example, if you have a credit card then you will be given a statement every month. This statement will show your new spending on your credit card, your payments to it and any outstanding balance that is carried over from previous months.

Overdraft

In banking terms an overdraft is the provision of credit that is attached to a bank account. If you are using your overdraft then you are basically taking more money out of your account than you have in/pay in so you are effectively borrowing money from your bank. This is known as being overdrawn.

Obligation

The legal responsibility of a borrower to repay a loan.

Other owner

A person whose name is on the collateral title; however, this person is not responsible for the debt. The Other Owner signs an acknowledgement, which indicates that the lending institution holds a security interest in the auto.

Offer to Purchase

A legal agreement that details a specific price for the purchase of a specific property.

Offset Account

A savings account linked to your mortgage in such a way that interest earned on your savings account is applied to reduce the interest on your mortgage.

Origination

The process of preparing, submitting and evaluating a loan application, generally includes a credit check, verification of employment, and a property valuation.

Overdrawn

The withdrawal of more money than an account actually has on deposit

P

Penal interest

Penal interest is the interest charged from the borrower on the installments delayed; if the installments are not received as per the repayment terms, by the end of the month.

Plinth area

Area measured externally of the whole building. This includes balconies; however this will not include common areas in apartment blocks/commercial buildings and spaces.

Power of attorney

It is an instrument of law empowering a specified person or persons to act for and in the name of the person executing it. The person for whom the act is done or who is so represented is called principal. The person who is so authorized to do or represent is called agent. It may be either notarized or registered depending on the transaction.

Pre-EMI

The EMI for the loan will begin after the loan has been disbursed in full. Till such time the borrower has to pay the interest for the loan. This amount of interest payable every month is called as pre-EMI.

Prepayment

It is the amount paid towards principal ahead of the prescribed repayment schedule. The benefit of interest is given to the party in such cases as per the norms of the home loan provider. Most HFCs charge some fee for pre-payment of loan before the tenure is over. The fee is normally in the range of 1-2% of the pre-paid amount.

Pre-sanction inspection of property

This is the inspection done immediately on receipt of the application of the loan application. A loan officer from the HFC will conduct an inspection of the property to ascertain the location of the property, verify the technical details of the house like structural stability etc and the stage of construction, if the loan is for construction.

Principal

The amount of money that has been borrowed. Interest is generally payable on the Principal outstanding from time to time.

Property tax

This is the tax levied on the property by the local authority such as Corporation, Municipality, etc to the person in whose name the property stands.

Portfolio

A combination of assets held for its investment benefits, including financial and non-financial returns. The asset mix is usually varied in kind and size to maintain an acceptable level of risk and return.

Principal

In commercial law, the principal is the amount that is received or borrowed, in the case of a loan, or the amount from which flows the interest. Also that part of a monthly payment that reduces the remaining balance of a loan.

Personal Income

Economic indicator that measures the total income of all Americans from all sources, and is reported both before and after taxes. Also reports personal spending and personal savings. The level of spending can be used as an indicator of consumer optimism. Frequency: monthly.

Personal property

Any and all property that is not real property.

Power of attorney

A written legal instrument that authorizes another person to act on one's behalf. A power of attorney can grant either complete or limited authority.OR It is an instrument empowering a specified person or persons to act for and in the name of the person executing it. The person for whom the act is done or who is so represented is called principal. The person who is so authorised to do or represent is called agent. It may be either notarised or registered depending on the transaction.

Pre-approval

A commitment made by a lender, to make a loan to a borrower, before the borrower has committed to the purchase of a particular property.

Preforeclosure sale

A process in which the lender allows a borrower to avoid foreclosure by selling the property for less than the amount that may be owed to the lender.

Prepayment

Any amount that is paid to reduce the principal balance, not interest, of a loan before the due date. OR It is the amount paid towards principal ahead of the prescribed repayment schedule. The benefit of interest is given to the party in such cases as per the norms of the company.

Prepayment penalty

A fee (usually substantial) that may be charged to a borrower who pays off a loan before the end of its agreed upon term. This penalty is meant to protect the bank from lost income not generated from interest on the loan.

Pre-qualification

Procedure to determine how much money a potential homebuyer will be eligible to borrow prior to actually applying for a loan.

Prime rate

The interest rate that banks charge to their best customers for short-term loans. Changes in the prime rate can influence changes in other interest rates.

Principal Balance

The outstanding balance of principal on a loan Principal does not include interest or fees.

Productivity

An economic indicator that measures the output per hour of work for nonfarm business production. Can be used in conjunction with the rate of change in GAP to determine whether economic growth is likely to be inflationary. A separate component measures unit labor costs, an important indicator of future inflation. Frequency: quarterly. Source: Labor Department.

Promissory note

A written promise to pay a specified sum to specified person over a specified period of time. OR A legal contract in which the borrower promises to pay back the loan. The "promissory note" sets forth the terms and conditions that apply to the loan repayment, such as interest rate, when payments are due, where payments are made, what happens if payments are not made, etc.

Property taxes

Taxes based on the assessed value of the home, paid by the homeowner for community services such as schools, public works, and other costs of local government. Sometimes paid as a part of the monthly mortgage payment.

Public auction

A gathering at a preannounced public location to sell property to satisfy a mortgage that is in default.

Purchase agreement

A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Penal interest

If the installments are not received as per the repayment terms, by the end of the month, the borrower will be charged interest on the installments delayed which is called as penal interest.

Property tax

This is the tax levied on the property by the local authority such as Corporation, Municipality, etc to the person in whose name the property stands

Payment Schedule

This information on the Truth in Lending Disclosure Statement shows the amount of the first loan payment, the amount and number of the regularly scheduled payments (usually monthly), the amount of the final payment, and when all those payments are due. The actual payment due may be greater for a number of reasons, including taxes and insurance. If the loan has an "adjustable rate," the actual payments will differ from the payment schedule

Prepayment Penalty

The charge which can be imposed if you pay off your loan before maturity. The Truth in Lending Disclosure Statement will show whether a loan has a prepayment penalty

Processing Fee

A fee charged by lenders or brokers to prepare a complete loan application file. A processing fee may be charged to the borrower and shown on the Settlement Statement (HUD-1).

Purchase Money Loan/Mortgage

A loan for the purpose of purchasing a home.

Prepaid

Those expenses of property which are paid in advance of their due date and will usually be prorated upon sale, such as taxes, insurance, rent, etc.

Possession letter

This is a letter handed over by the developer to the customer stating that the property is complete and ready for occupation. This letter also indicates the final dues payable by the customer before the key is handed over to the customer.

Personal property

Any property that is not real property.

Payment date

A payment date is the date that any payment for a financial product such as a loan is due to be paid.

Payment default

A payment default takes place when a regular payment or payments to a financial product such as a loan are missed.

Preferred placement form

The form that is completed with an individual's financial information in order to submit and search for the best matched lender to the individual's specific credit needs

Payee

The person or entity to whom a cheque is payable.

Plan

A detailed illustration of a house that shows the internal layout and dimensions and the position of the house on the land.

Pre-Approval

If you’re thinking of buying a home, then obtaining pre-approval for a mortgage is a good idea. This determines the size of the mortgage you qualify for, and therefore, decides the price range for the homes you can look at.

Promissory note

A written promise committing an individual or institution to repay a specified sum of money either on demand or at a fixed or determinable future date, with or without interest

Pre-authorized payment

An amount that an individual authorizes to be automatically withdrawn from his or her deposit account on a regular basis. Mortgage payments, car or automatic bill payments, or contributions to an RSP are examples.

Pledged Account Mortgage (PAM)

With this type of mortgage, some of the funds that you bring to closing are put into an interest-bearing savings account. Money from this account will be gradually withdrawn and applied towards your mortgage, lowering your monthly mortgage payment.

Prearranged Refinancing Agreement

When you have an agreement with your lender to refinance in the future according to special terms, it is referred to as a prearranged refinancing agreement. This type of arrangement is used by the lender as an incentive for you to arrange your current and future financing through them instead of going to one of their competitors.

Q

Qualifying ratios

Simple calculations used in determining whether a borrower can qualify for a mortgage. They usually consist of two separate calculations: 1) Monthly housing expenses as a percent of total gross monthly income 2) Total monthly debt obligations as apercent of gross monthly income OR The ratio of your fixed monthly expenses to your gross monthly income, used to determine how much you can afford to borrow. The fixed monthly expenses would include PITI along with other obligations such as student loans, car loans, or credit card payments.

Qualify

The ability to meet a lender's criteria for granting credit.

Quote

A price that represents the cost of a specific item, such as a loan rate, service contract, price of an insurance policy and so on.

R

Refinancing

The repayment of an existing loan from the proceeds of a new loan. A Refinancing could involve repaying one lender and borrowing from another lender.

Registration

The process following Settlement, by which legal title to property is transferred into the name of the purchaser. With a land purchase this is done through Land Information India. Where the land purchase is secured by a Mortgage, the Mortgage will be registered on the Certificate of Title.

Registration value

It is the value of the property at which the property is registered. The rate for registration value is generally fixed for specific areas by the authorities in most places.

Repayment

The payment of EMI or pre-EMI as applicable is called as repayment of the loan. In case of NRIs this amount should come from Non-Resident (External) Account/Non-Resident (Ordinary) Account in India.

Repayment Holiday

A period during which loan repayments are suspended. During this period interest still accrues. Payments are generally adjusted afterwards so that the loan is still repayable within the original time period.

Role of guarantor

The role of a guarantor is commitment by the way of agreeing to the terms and conditions of the loan and liable to the extent of the loan/liability together with the interest and other charges.

Refinance Charge

Housing Finance companies do not charge you for prepayments from your own savings. However, if you retire a loan using money borrowed from another Finance Company, you will have to pay a refinance charge of 1-2% of the loan outstanding.

Rest

Interest rates are quoted on a daily rest, monthly rest or annual rest basis. The annual rest quote implies that the company gives you the credit for the monthly principal repayments only at the end of each year. Such loans are therefore more expensive than a monthly/daily rest loan. The shorter the tenure of the loan, the greater the effective interest rate difference will be.

Receivables

Accounts receivable; an amount that is owed the business, usually by one of its customers as a result of the ordinary extension of credit,

Recourse

Refers to the right, in an agreement, to demand payment from the person who is taking on an obligation. A full recourse loan refers to the right of the lender to take any assets of the borrower if repayment is not made. A limited recourse loan only allows the lender to take assets named in the loan agreement. A non-recourse loan limits the lender's rights to the particular asset being financed -- an approach that is common in home mortgages and other real estate loans.

Restructure

A revision of a financial agreement that alters the conditions or covenants of the original agreement. For example, parties may agree to restructure a loan agreement, easing the payment schedule, when a borrower is delinquent or otherwise faces default on a loan.

Rate improvement mortgage

A fixed-rate mortgage (FRM) that includes a clause allowing the borrower the option to reduce the interest rate one time (without refinancing) during the first few years of the loan term.

Rate of interest

Same as interest rate.

Rate lock

A commitment issued by a lender or broker to a borrower, guaranteeing a specified interest rate for a specified period of time. Also called a lock-in, or rate commitment.

Real property

Land and anything permanently affixed to the land; including structures, trees, minerals, and the interest, benefits and rights thereof

Real estate

Land, and any buildings or trees on the land. Same as real property

Real estate agent

A person licensed to negotiate the purchase and sale of real estate on behalf of buyers and sellers.

Realtor

A real estate broker or associate who is an active member of a local real estate board that is affiliated with the National Association of Realtors

Reconveyance

The releasing of a property owner from a deed of trust by the trustee when the underlying loan has been paid off. The release is in the form of a deed of reconveyance, which cancels the deed of trust.

Refinance

The process of paying off an existing loan (or loans) with the proceeds from a new loan, using the same property as security. OR Loan or any additional loan financed on an existing property.

Rehabilitation mortgage

A loan granted to cover the costs of repairing or improving an existing property. Sometimes also used to acquire property with the intent to improve it.

Remaining balance

The amount of principal owed on a loan that has not yet been repaid

Remaining term

The number of payments left to be made on a loan before it is fully amortized (paid in full).

Repayment plan

An agreement between a lender and a borrower, made to help the borrower repay delinquent installments

Reverse mortgage

See Home Equity Conversion Mortgage (HECM).

Right of first refusal

A contract provision that requires a property owner to give another party the first opportunity to purchase or lease the property before it is offered to others.

Right of ingress or egress

The right to enter or leave specific property or premises.

Right of survivorship

In joint tenancy, the right of surviving joint tenants to acquire the interest of a deceased joint tenant.

Registration value

It is the value of the property at which the property is registered. Generally the rates for the value for registration is fixed for specific areas by the authorities in many places.

Right to Rescission

The legal right to void or cancel your mortgage contract in such a way as to treat the contract as if it never existed. Right of rescission is not applicable to mortgages made to purchase a home, but may be applicable to other mortgages, such as home equity loans.

Rate Lock (Lock in the Rate)

Refers to the agreement between the borrower and the lender or broker that as long as the loan is closed within a certain period of time (for example, 30 or 60 days), the interest rate on the loan will be set (locked) at an agreed- upon rate. A "rate lock" agreement must be in writing or it will be unenforceable

Rescind (also Right of Rescission)

Literally means "to take back" or "cancel." If a borrower rescinds a mortgage loan, it is as if the mortgage loan never existed. Some borrowers have by law a right to "rescind" certain mortgage loans. Note: A Borrower is entitled to a refund all fees paid in connection with the loan if the Borrower exercises his right of rescission.

Rebate

Compensation received from a wholesale lender which can be used to cover closing costs or as a refund to the borrower. Loans with rebates often carry higher interest rates than loans with "points" (see above).OR A manufacturer's reduction to the price of an auto, which serves as an incentive to buyers. May also be referred to as a manufacturer's rebate or customer incentive.

Refinancing

The process of paying off one loan with the proceeds from a new loan using the same property as security.

Returns

Yields or profits made in a financial transaction.

Risk

Chance or danger of a loss of capital and/or interest in financial transaction.

Registration of an Agreement

It is always advisable to register the documents at the time of purchase of immovable property. The agreement should be registered with the Sub-registrar of assurances under the provisions of the Indian Registration Act. Stamp duty should be paid prior to the Registration

Restrictive Covenants

Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land, or may be "personal" and binding only between the original seller and buyer. The determination whether a covenant runs with the land or is personal is governed by the language of the covenant, the intent of the parties, and the law in the State where the land is situated. Restrictive covenants that run with the land are encumbrances and may affect the value and marketability of title. Restrictive covenants may limit the density of buildings per acre, regulate size, style or price range of buildings to be erected, or prevent particular businesses from operating or minority groups from owning or occupying homes in a given area. (This latter discriminatory covenant is unconstitutional and has been declared unenforceable by the U.S. Supreme Court.)

Re-amortise

To recalculate the minimum repayment required to repay the outstanding balance of your loan over the remaining period (particularly where the loan balance has substantially increased or decreased from the original amount).

Redraw facility

The component of your variable loan rate into which you can make extra repayments when you can afford to, and later draw on these funds if you need to.

Redraw Fee

A fee charged to cover or partially cover the lender's internal costs of allowing the borrower to redraw money.

Residential Investment Loan

A loan obtained for the purpose of purchasing real estate for investment purposes (for example, to be rented out) rather than for owner-occupier purposes

S

Sale agreement

Sale Agreement is an agreement between the parties dealing with the property and which creates a right to obtain a sale deed mentioning the property. It is a document that precedes a sale deed and in such cases does not require registration and will also not confer any charge or right on the property. However in some states the sale agreement itself will be registered and will act as a sale deed. A sale agreement normally fixes a time for completion, payment of earnest money or part payment of purchase consideration.

Sale and Purchase Agreement

A Contract between a seller (Vendor) and a purchaser for the sale and purchase of property. A Sale and Purchase Agreement for land must be in writing.

Sale deed

Sale deed is an instrument of law in writing which transfers the ownership of the property or properties in exchange for a price paid/consideration. This is a document that requires to be registered compulsorily.

Sanction letter

Once the loan is approved, a letter communicating the sanction terms and conditions will be issued to the party.

Sanctioned plan

A drawing containing the plans, section of elevations of areas along with detailed schedules, specifications and area statements on which the sanctioning authorities grant permission to carry out work as regulated in the bye laws.

Settlement

The process by which a sale and purchase of property takes place. It is commonly done by lawyers and involves the payment of the settlement amount (which is usually the purchase price less any deposit already paid and plus or minus any other items set out in the settlement statement) in exchange for the Certificate of Title, a transfer document and a release of previous charges over the property. Keys to the property are usually either handed over to the purchaser or his/her lawyer at Settlement, or able to be picked up from the estate agent immediately following Settlement.

Stamp duty

It is the duty/fee payable on the different instruments/documents as per the prescribed rate. This differs from state to state. The adequacy of stamp duty should be ensured to make a document valid and enforceable.

Statement of account

This is the statement indicating the outstanding loan amount, the amount paid by the borrower, the appropriations made towards interest and principal, etc. at the end of the financial year.

Submission of loan application form

The loan application form asks for information of the borrower, his family, details of his income and expenditure and his financial history, cost of the property, availability of resources, details of personal finances including bank account numbers, details of property proposed to be purchased etc.

Super built-up areas

The built-up area of a flat including the proportionate area of staircases, lift, lobby and passage on each floor and garbage chutes are distributed among all the flats and the floors in proportion of the built-up area.

Security

A pledge made to secure the performance of a contract or the fulfillment of an obligation. Examples of securities include real estate, equipment stocks or a co-signer. Mortgages are a form of security with strong legal standing, because they are publicly registered following a formal legal procedure. A mortgage gives the lender holding a mortgage security the right to reclaim the asset being financed, if repayment is not made.

Sales contract

A written contract by which the purchaser and seller agree to all terms of the sale. Same as an agreement of sale.

Second mortgage

A loan that has a lien position subordinate to the first mortgage.

Secondary mortgage market

The buying and selling of existing mortgages. Primarily residential first mortgages

Secured loan

A loan that is backed by collateral

Servicer

A company that collects principal and interest payments from borrowers and manages borrowers' escrow accounts. The servicer may or may not be the original lender

Settlement

The time when loan and mortgage documents are formally signed and the loan transaction is completed. Sometimes called "Closing

Settlement sheet

A mortgage loan closing form required by HUD that is often called a HUD-1. It provides details of all charges and payments made in connection with your loan, and shows to whom they are distributed.

Sole ownership

Ownership of property by a single person or entity.

Standard payment calculation

The process used to determine the monthly payment required to repay the remaining principal balance of a loan in fairly equal instalments, over the remaining term of the loan at the current interest rate.

Step mortgage

A type of adjustable-rate mortgage (ARM) that allows for the interest rate to increase according to a specified schedule. At the end of the specified period, the rate and payments will remain constant for the remainder of the loan. Sometimes called a step-rate mortgage.

Step Rate mortgage

A mortgage, in which the interest rate gradually increases over the first few years of the loan. This allows you to have a lower monthly mortgage payment at the beginning of the loan term. The initial interest rates of these loans are generally lower than the interest rates of a 30-year fixed loan, but higher than the interest rate of a 1-year ARM.

Subdivision

A housing development that is created by dividing a large parcel of land into many individual lots for sale.

Subordinate financing

Any mortgage or other lien that has a lower priority than that of the first mortgage.

Ssurvey

A detailed drawing showing the precise legal boundaries of a property, the location of improvements, easements, rights of way and other physical features.

Sweat equity

Contribution to the construction of a property in the form of labor or services, instead of cash.

Security deposit

Amount paid as a security or part security against the loan.

Stamp Duty

It is the duty/fee payable on the different instruments/documents as per the prescribed rate. This differs from state to state. The adequacy of stamp duty should be ensured to make a document valid and enforceable

Security Interest

An interest that a lender takes in the borrower's property to assure repayment of a debt.

Servicing a Loan

The ongoing process of collecting your monthly mortgage payment, including accounting for and payment of your yearly tax and/or homeowners insurance bills.

Settlement Agent (may also be called closing agent or settlement attorney)

The person who organizes and is in charge of the loan closing. The settlement agent is the person who can explain any document the borrower must sign.

Simple interest

An amount earned on an account holder's principal, according to a specified rate. This does not include any compounding interest

Stated/documented income

Some loan products require only that applicants "state" the source of their income without providing supporting documentation such as tax returns.

Standing Instructions:

Instructions to a bank to debit a fixed amount from your account and pay your financier

Statutory Charges:

Charges like stamp duty, sales tax etc imposed by the government.

Structural Survey

A detailed survey of the structure of a building carried out by a Structural Engineer or Chartered Building Surveyor. Surveyors are liable for negligence.

Service contract

These are contracts that provide financial coverage to repair or replace any failure or breakdown within the limits of the policy.

Search

An examination of or research usually carried out on the buyer and seller's behalf prior to the settlement to confirm that a seller is in a position to sell a property and that there are no encumbrances on it

Securitisation

This is a process where assets (such as mortgages) with an income stream are pooled and converted into saleable securities. These assets are purchased and packaged into low risk negotiable securities such as bonds and then issued to investors.

Settlement Date

The date on which the new owner of a home finalises payment of the land/house and assumes possession.

Signatory

A person authorised to utilise an account.

Split Loan

A combination of loan types forming one loan, such as partial fixed/variable interest rate loans. Typically, different types of interest are paid on different portional of the account.

Switching Fee

The lender may impose a switching fee where an existing borrower wishes to change from one loan type to another.

Serviceability

This is the term used to describe the borrower's ability to make regular repayments of an agreed amount

Subject To Finance

Where the purchaser had not yet received formal home loan approval, and wants to be able to end the contract in the event that the home loan is rejected, the contract can be made "subject to finance". This means that a condition is added to the contract that allows a fixed period of time, by which the home loan must be approved. If the home loan is not approved, then the purchase may elect to end the contract. Purchasers should always ensure that the finance condition is drafted by their lawyer, or at least with advice from their lawyer. It is often the case that estate agents draft finance conditions such that the purchaser can't help but breach the terms, and risk losing the deposit.

T

Term

In relation to a loan, means the period from the making of the loan (or drawdown) until the loan must be repaid. Sometimes "Term" can also mean a defined period that is shorter than the whole of loan Term (Eg. Fixed Interest Term).

Title

It is the right and interest over the property evidencing the ownership.

Tenure of the Loan

This is the period for which a loan is provided (or opted) to a borrower. Normally, loans are given for a period of 1-15 years. Some companies also give loans up to 20 years at an additional interest cost of 0.25% -0.5%.

Tacking

Adding on to a certain period of time.

Taking

The acquisition of a piece of land, usually through condemnation.

Tangible property

Real estate and other property of value which can be seen and touched

Tax base

The total value of property, income, or other taxable assets subject to taxation

Tenancy by the entirety

Type of joint tenancy that provides the right of survivorship and is available only to a husband and wife. Compare with tenancy in common.

Tenancy in common

Type of joint tenancy without the right of survivorship. Compare with tenancy by the entirety and with joint tenancy.

Third-party origination

An arrangement whereby a lender uses another party (often a mortgage broker) to originate, process, underwrite or package the mortgages it plans to sell to the secondary mortgage market.

Title company

A company that specializes in examining titles to real estate and issuing title insurance

Title insurance

Type of insurance that protects the lender (lender's policy) or the buyer (owner's policy) against loss sustained from disputes over property ownership or defects in the title.

Title search

An examination of the public title records to determine the legal ownership of a property, and to ensure that there are no liens, encumbrances or other claims outstanding. OR An investigation into the history of ownership of a property to check for liens, unpaid claims, restrictions or problems to prove that the seller can transfer free and clear ownership.

Total expense ratio

Total monthly debt obligations expressed as a percentage of gross monthly income. This ratio includes monthly housing expenses (PITI), plus other monthly obligations.

Trade equity

Equity that results from a buyer giving existing property as trade for all, or part of, the down payment on the subject property.

Transfer of ownership

Any legal method by which the ownership of property changes hands.

Trust deed

The legal document that transfers ownership of a piece of property.

Trustee

A person or company that controls ownership of a property for the benefit of another party. In the case of a deed of trust, the trustee holds the property title for the lender, and is responsible for enforcing the terms of the deed of trust.

Two-step mortgage

A type of adjustable-rate mortgage (ARM) that has one interest rate for the first few years (typically 5 or 7), and a different rate for the remainder of the amortization term.

Tenure

Period from the date of disbursement of loan to the date of the last EMI payment or the date of closure of loan.

Total initial payment

Initial payment made by the customer when the asset is purchased, also includes service charges and advance EMIs if any.

Total Debt Ratio

Monthly debt and housing payments, divided by gross monthly income, to prove that the seller can transfer free and clear ownership. Also known as Obligations-to-Income Ratio or Back-End Ratio.

Top-up Loan

A top-up loan is an additional loan given by a lender that has already given a loan to a consumer or a business

Total sales price

The total price of a credit purchase including any down payment equal to the total of payments plus any down payment.

Trade in Allowance

A credit amount given to a customer upon purchase of a new auto, in exchange for their old property. This credit amount may reduce the cash price of the new purchase.

Title Deed

The document which discloses the legal description and ownership of a property and any registered encumbrances over that property.

Term Deposit

Often called a fixed interest account, this is a savings account where the interest rate is fixed for a set period of time

Transfer

A document registered with the State Titles Office that confirms that the change of ownership as noted on the title.

Title Fees

This fee is payable to the State's Title Office for a title seatch, the transfer of property ownership and the registration of a new mortgage or discharge of an old one

Transaction fees

These are fees charged by the lender on particular transactions, such as withdrawals, transfers, deposits etc., usually on an item by item basis.

Title Report

A document that provides the results of a title search. This report will ensure that the property you are purchasing has no outstanding claims against it and that the seller of the property is the legal owner. If claims are found on the title report, they must be satisfied prior to your purchase of the property

Total debt service ratio

The percentage of an individual's gross income that will be used to service all personal debt, including monthly payments of mortgage principal, interest, taxes, heating and other outstanding loans and debts.

U

Urban land ceiling and regulation

The Urban Land (Ceiling & Regulation) Act, 1976 is for the imposition of a ceiling on vacant land in urban agglomeration, for the acquisition of such loan in excess of ceiling limit, to regulate the construction.

Underlying mortgage

Generally refers to the first mortgage when there is a wraparound mortgage.

Underwriting

Detailed process of evaluating a borrower's loan application to determine the risk involved for the lender. Underwriting usually involves an in-depth analysis of the borrower's credit history, as well as an examination of the value and quality of the subject property.OR The process of verifying data and approving a loan

Undivided interest

An ownership right to use and occupy property that is shared among more than one owner. No single co-owner may have exclusive rights or possession to any part of the property.

Unsecured loan

A loan that is not backed by collateral.

Underwriting Fee

This is a fee charged by the lender to evaluate whether the borrower qualifies for a mortgage loan. An underwriting fee may be charged to the borrower

Underpayment

Many lending products, especially mortgages, now come with a clause in their terms and conditions that allow you to make underpayments. If this is the case then you basically have the permission of the lender to pay less for a monthly mortgage repayment than you normally have to ? i.e. you can underpay or not pay.

Unencumbered

Property that is owned without borrowing or other legal charge over it.

Upfront Costs

The expenses a borrower incurs when closing a home loan. These costs include a down payment amount, any prepaid taxes, insurance and interest, the underwriting fees of the loan, and fees for the title search, appraisal, credit report and deed recording

V

Vendor

The seller of a property.

Vacant land

Land that is not currently being used.

Vacate

To move out of a premises.

Vacation home

A home used by the owners only occasionally or seasonally primarily for recreational purposes

Valid

A document or contract that has legally binding force.

Variable interest

An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly. See Adjustable Rate Mortgages for a complete guide.

Vested

Having the right or privilege to use a portion of anything, especially property.

Valuation

Estimating the value of a property using set procedures, guidelines and tools

Verification of Employment

Written verification of your employment. Sent by your current employer, this may include your salary information, and your job description

Variation

A change to any part of a loan contract in accordance with the terms of that contract.

Vendor Statement

A statement by a seller to a buyer, detailing material particulars regarding the property in question.

Venture Capital

Source of financing for start-up companies and new or turnaround ventures that involve investment risk but offer the prospect for above average future profits--also called "risk capital." Venture capital financing supplements other funds that an entrepreneur is able to tap (or takes the place of loans that conventional financial institutions are unwilling to risk).

Valuer

A valuer is a professional person whose role it is to determine the current market value of a property.

W

Warranties

Statement attesting that certain statements are true. For instance, the borrower may warrant that it is a corporation, that it is entering into the agreement legally and that financial statements supplied to the bank are true.

Working Capital

Technically, means current assets and current liabilities. The term is commonly used a synonymous with net working capital. The term often also is used to refer to all short-term funding needs for operations (excluding debt service and fixed assets). A company's investment in current assets that are used to maintain normal business operations. Net working capital, which is the excess of current assets over current liabilities is also interchangeable with working capital. Both reflect the resources in circulation to meet operating needs and obligations as they come due.

Write Off

When an investment, such as a loan, becomes seriously delinquent or in default and is determined to be uncollectible, the lender may choose to charge the outstanding investment amount as an expense or a loss.

Warranty

A promise contained in a contract.

Waiver

The voluntary abandonment or surrender of some claim, right, or privilege.

Working Capital Loan

Loans for business expenses such as, advertising, wages, rents, and other operational costs. Often these loans are secured by tangible assets or, in the case of long-standing good credit, by the "full faith and credit" of the company.

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Y

Yield

A measurement of the rate of earnings from an investment, usually expressed as a percentage. OR The amount generated in interest on an account.

Yield to maturity (YTM)

The internal rate of return on an investment. Typically takes into account all investment returns and

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