Vestin Mortgage > Definitions

  DEFINITIONS

ACCELERATION CLAUSE - A clause included in the body of a contract which stipulates that the entire balance owing shall become due immediately and payable in the event of a breach of certain other conditions of the contract, such as insolvency, or the debtor's failure to pay taxes on mortgaged property, etc.

AMORTIZATION - Liquidating or reducing the principal on a mortgage loan by making mortgage payments over a specific period of time.

APPRAISAL - Evaluation of a specific piece of personal or real property, or the property of another as a whole.

APPRECIATION - An increase in an assetís value.

ASSUMPTION - The act of taking over a mortgage obligation incurred by the original borrower. The new owner assumes the mortgage obligations and assumes title to the property.

BALLOON PAYMENT - A final loan payment which is larger than the regular payment.

BENEFICIARY - A person beneficially interested in a trust or estate.

BLANKET MORTGAGE - A mortgage which may use two or more pieces of real estate for security on a single loan.

BLUE SKY LAW - A name given to certain laws enacted by the various states which regulate the sale and issuance of securities, in the attempt to prevent fraud in their sale and disposition.

BORROWER - Any "legal entity" who obtains funds from the lender by the extension of credit for a period of time for a consideration.

BRIDGE LOAN - A short term loan secured by a trust deed or mortgage designed to help a borrower quickly obtain the necessary cash to purchase and/or develop a property while the borrower works on permanent financing.

BROKER/DEALER - An individual or firm that is in the business of buying and selling securities. Broker/dealers are registered with the Securities and Exchange Commission (SEC).

CAPITAL GAIN - The difference of an assetís selling price above its original purchase price.

CLASS ďAĒ PROPERTY - Most prestigious buildings competing for premier office users with rents above average for the area. Buildings have high quality standard finishes, state of the art systems, exceptional accessibility, and a definite market presence.

COLLATERAL - Stocks, bonds, evidences of deposit, and other marketable properties which a borrower pledges as security for a loan.

DEED OF TRUST - An instrument used to pledge real estate as collateral (security) for a loan. Some states use a deed of trust while others use a mortgage as security for a mortgage loan.

DEFAULT - The failure of a duty or obligation, such as the failure to make the required payments called for in a mortgage note. Loan default may cause foreclosure.

EQUITY - The value a property owner has in real estate once the obligations (liens) and costs of selling are deducted.

ESCROW ACCOUNT - Funds which are set aside and held in trust by a third party, usually to pay taxes and insurance on real estate.

EXTENSION - An extension of the maturity date resulting in extension of the terms of a loan.

FEE SIMPLE - Title to land which is without limitation or restriction.

FORECLOSURE - A legal process by which a lender enforces a defaulted mortgage loan by exercising a power of sale on the mortgaged property.

GRANTOR - A seller of real estate - one who conveys title of real property by deed.

INCOME PROPERTY - Real estate that generates cash flow.

INDIVIDUAL RETIREMENT ACCOUNT (IRA) - A tax-deferred retirement account for an individual who does not participate in a pension plan at work or who does participate and meet certain income.

INTERIM FINANCING - A temporary construction loan made during the completion of a home or building, which is usually replaced by a permanent loan after completion and/or sale of the property.

LEASE - A contract whereby one party, known as the lessor, grants to another party, known as the lessee, the rights of use, tenancy, or occupancy to property owned by the lessor.

LEVERAGE - The degree to which an investor or business is using borrowed money.

LIQUIDATE - To convert assets into cash.

LIQUIDITY - The ability of an asset to be converted into cash quickly.

LOAN TO VALUE RATIO (LTV) - The ratio or relationship between the amount of a mortgage loan and the value of the property, expressed as a percentage.

MARKET VALUE - The value of a property determined by comparable sales, or the actual sale price.

MECHANICS LIEN - A lien placed on a property as security for payment for work performed and materials supplied in the construction of the property.

MORTGAGOR - The owner of real property pledging the property as collateral (security) for a mortgage loan by a mortgagee (lender), usually in the purchase of the real property.

NATIONAL ASSOCIATION OF SECURITIES DEALERS (NASD) - A self-regulatory securities industry organization responsible for the operation and regulation of the stock market and for conducting regulatory reviews of members' business activities.

NET LEASE - A property lease in which the tenant pays all expenses normally associated with ownership, such as utilities, maintenance, repairs, insurance, and taxes.

NET WORTH - Total assets minus total liabilities of an individual or company.

NOTE (also, PROMISSORY NOTE) - The signed promise to pay, or obligation to repay a debt, such as a mortgage note.

OPERATING COSTS - The day-to-day expenses of running a business.

ORDINARY INCOME - Income other than capital gains.

PASSIVE INCOME - Income derived from business investments in which the individual is not actively involved, such as a real estate limited partnership.

PORTFOLIO - All investments collectively owned by the same individual or organization.

PRINCIPAL - The original amount borrowed as evidenced by a promissory note.

QUIT CLAIM DEED - The deed (or instrument) by which one conveys or transfers to another any interest or title one may have in real property.

REAL PROPERTY - All property of a fixed, permanent, immovable nature, such as land, tenements, etc.

REAL ESTATE INVESTMENT TRUST (REIT) - A Real Estate Investment Trust is a corporation whose primary business is owning and managing real estate properties, such as apartment buildings, office buildings, hotels, warehouses, health care facilities, shopping malls or golf courses. While many REITs invest directly in these properties, some types of REITS can also invest in real estate related loans, such as mortgages. A hybrid type of REIT can invest in a combination of real properties and mortgages. Structurally, a REIT is set up as a company, shares of which may be purchased by investors. The management of the REIT company uses those pooled investment dollars to buy and manage an array of properties. Collectively all shareholders indirectly own small pieces of each of the properties that the REIT owns and operates.

RETURN - The profit made on an investment, expressed annually as a percentage of the total amount invested.

REGISTERED REPRESENTATIVE - An individual who is licensed to sell securities and has the legal power of an agent, having passed the Series 7and Series 63 examinations. Usually works for a brokerage licensed by the SEC, NYSE, and NASD.

RESERVE - Generally means a portion of the profits which are allocated to various reserve accounts to protect any depreciation in asset values

RISK - The possibility of loss of capital on an investment.

SATISFACTION OF MORTGAGE (RECONVEYANCE) - Also called a "release of mortgage," a document issued by the lender when the mortgage is paid in full.

SECURITIES AND EXCHANGE COMMISSION (SEC) - The primary federal regulatory agency for the securities industry, whose responsibility is to promote full disclosure and to protect investors against fraudulent and manipulative practices in the securities markets.

TITLE INSURANCE - Insurance issued to an owner and/or lender on real property to protect against claims arising by reason of defects, clouds and liens on the title to the property.

VALUATION - Assessed value or price of an asset or company.

YIELD - A return on an investment, which includes the interest rate charged, discount points paid and any other charges collected.