Glossary of Real Estate & Mortgage Terms
Want easy fast answers direct
from an experienced loan professional? Use our
Quick Quote Form
- we'll answer all your questions and when you're ready, deliver the right loan
solution customized for you! Or for even faster services call us at
516-933-1800. You'll be glad you did!
Finest Capital Ltd, we work hard to fully inform our clients and
build their confidence at all aspects of the loan process.
We are pleased to provide this
extensive list of terms however Finest Capital Ltd is not responsible
for errors, omissions or misinterpretations on this page. The
definitions below are not comprehensive and should not be relied upon.
They are posted only to provide a general idea of each term.
You should consult your attorney or
professional advisor for a full explanation of these terms.
Please scroll down to view the
A summary; an abridgment. Before the use of photostatic copying public
records were kept by abstracts of recorded documents.
Abstract of Title
A compilation of the recorded documents relating to a parcel of land, from
which an attorney may give an option as to the condition of title. Still
in use in some states, but giving way to the use of title insurance.
A measure, usually of land, equal to 160 sq. rods (43,560 sq. ft.) in any
Action to Quiet Title
A court action to establish ownership to real property. Although technically
not an action to remove a cloud on a title, the two actions are usually
referred to as "Quiet Title" actions.
Adjustable Rate Mortgage(ARM)
A mortgage where the interest rate is not fixed, but changes during the
life of the loan in line with movements in an index rate. You may also
see ARM's referred to as AML's or VRM's.
An Agency relationship is one in which one person is empowered to act on
behalf of another, subject to the control and consent of the person being
The person who is acting on behalf of the principal or client.
Agreement of Sale
In some states it is synonymous with a purchase agreement (Purchase Agreement).
In other states, it is synonymous with a land contract (Land Contract).
A clause calling for a debt under a mortgage or deed of trust to be due
in its entirety upon transfer of ownership of the secured property.
To reduce a debt by regular payments of both principal and interest, as
opposed to interest only payment.
Annual Percentage Rate(APR)
A measure of the cost of credit, expressed as a yearly rate. It includes
interest as well as other charges. Because all lenders follow the same
rules to ensure the accuracy of the annual percentage rate, it provides
consumers with a good basis for comparing the cost of loans, including
An option of the value of a property at a given time, based on facts regarding
the location, improvements, etc., of the property and surroundings.
Payment made after its due is in arrears. Interest is said to be paid in
arrears since it is paid to the date of payment rather than in advance.
When a home is sold, the seller may be able to transfer the mortgage to
the new buyer. This means the mortgage is assumable. Lenders generally
require credit review of the new borrower and may charge a fee for the
assumption. Some mortgages contain a due-on-sale clause, which means that
the mortgage may not be transferable to the new buyer. Instead, the lender
may make you pay the entire balance that is due when you sell the home.
Assumability can help you attract buyers if you sell your home.
Assumption of Mortgage
Agreement by a buyer to assume the liability under an existing note secured
by a mortgage or deed of trust.
A note calling for periodic payments which are insufficient to fully amortize
the face amount of the note prior to maturity, so that a principal sum
known as a "Balloon" is due at maturity.
The final payment of a mortgage which is larger than the regular payment;
it usually extinguishes the debt.
A report issued by a title insurance company setting forth the condition
of title and setting forth conditions, which, if satisfied, will cause
a policy of title insurance to be issued.
A mortgage covering more than one property of the mortgage.
A form of interim loan, generally made between a short term loan and a
long term loan, when the borrower needs to have more time before taking
on long term financing.
British Thermal Unit(B.T.U.)
Unit of heat required to raise one pound of water one degree Fahrenheit.
With a buydown, the seller pays an amount to the lender so that the lender
can give you a lower rate and lower payments, usually for an early period
of a loan. The seller may increase the sales price to cover the cost of
A limit on how much the interest rate or monthly payment of an ARM
can change, either at each adjustment or during the life of the mortgage.
Payment CAP's don't limit the amount of interest the lender is earning
so the may cause negative amortization.
Certificate of Eligibility
A certificate obtained by a veteran from a Veteran's Administration office
which states that the veteran is eligible for a V.A. insured loan.
A true copy, attested to be true by the officer holding the original.
Cestui que trust
One having an equitable interest in property, legal title being vested
Chain of Title
The chronological order of conveyancing of a parcel of land, from the original
owner to the present owner.
The statement which lists the financial settlement between buyer and seller,
and also the costs each must pay. A separate statement for buyer and seller
is sometimes prepared.
Cloud on Title
An invalid encumbrance on real property, which if valid, would affect the
rights of the owner.
Equally responsible for repayment as the borrower.
A written promise to make or insure a loan for a specified amount and on
Properties used as comparisons to determine the value of a specified property.
A structure of two or more units, the interior space of which are individually
Short term financing of real estate construction. Generally followed by
the long term financing called a "take out" loan, issued upon completion
The dependence upon a stated event which must occur before a contract is
Contract of Sale
Depending on area of country it may be a Land Contract or a Purchase Agreement.
Expenses incurred in the closing of a real estate or mortgage transaction.
A loan neither insure by the FHA nor guaranteed by the VA.
A provision in some ARMs that allows you to change the
a fixed-rate loan at some point during the
Usually the conversion is allowed at the end of the first adjustment period.
At the time of the conversion, the new fixed rate is generally set at one
of the rates then prevailing for fixed-rate mortgages. The conversion feature
may be available at extra cost.
Cost Plus Contract
A building contract setting the builder's profit at a set percentage of
actual cost of labor and materials.
Contract Sales Price
The full purchase price as stated in the contract.
A division within a state, usually encompassing one or more cities or towns.
Certificate of Reasonable Value(CRV)
An appraisal of property for the purpose of insurance by the Veteran's
Declaration of Restrictions
A set of restrictions filed by a subdivider to cover an entire tract or
Title to a negotiable instrument obtained by fraud. Title to real property
which lacks some of the elements necessary to transfer good title.
Decrease in value to real property improvements caused by deterioration
Real estate left by will.
One to whom real estate is given by will.
A testator who leaves real estate.
Direct Reduction Mortgage
An amortized mortgage. One on which principal and interest being computed
on the remaining balance.
Payments made during the course of an escrow or at closing.
Is an ARM with an initial discount, the lender gives
up a number of percentage points of interest to give you a lower rate and
lower payments for part of the mortgage term. After the discount period,
the ARM rate will probably go up depending on the index
Documentary Tax Stamps
Stamps, affixed to a deed, showing the amount of transfer tax.
A clause in a mortgage or deed or trust which places the real estate as
security for existing debts between the parties.
A right created by grant, reservation, agreement, prescription, or necessary
implication, which one has in the land of another.
A Government right to acquire private property for public use by condemnation,
and the payment of just compensation.
Construction onto the property of another, wall, fence, etc.
A claim, line charge, attached to and binding real property.
The difference between the market value of the property and the homeowners
Delivery of a deed by a grantor to a third party for delivery to the grantee
upon the happening of a contingent event.
That portion of a mortgagor's monthly payment held in trust by the lender
to pay for taxes mortgage insurance, hazard insurance,
lease payments, and other items as they become due, also know as "impounds"
in some states.
An assumptions or wrap loan transactions, the buyer reimburses the seller
for the current balance of his escrow (or impounded) funds.
Federal Home Board
The board which charters and regulates federal savings and loan associations,
as well as controlling the system of Federal Home Loan Banks.
Federal Tax Lien
A lien attached to property for nonpayment of a federal tax.
An estate under which the owner is entitled to unrestricted powers to dispose
of the property, and which can be left by will or inherited.
Federal Home Loan Board
The board which charters and forbids discrimination in the sale.
Federal Housing Administration
A federal Agency which insures first mortgages, enabling lenders to loan
a very high percentage of the sale price.
Freddie Mac (FHLMC)
Federal Home Loan Mortgage Corporation. A federal Agency purchasing first
mortgages, both conventional and federally insured, from members of the
Federal Reserve System, and the Federal Home Loan Bank System.
A proceeding in or out of court, to extinguish all rights, title, and interest,
of the owner(s) of property in order to sell the property to satisfy a
lien against it.
Revealing all the known facts which may affect the decision of a buyer
A lien such as a tax lien or judgment lien which attaches to all property
of the debtor rather than the lien of, for example, a trust deed, which
attaches only to a specific property.
Ginnie Mac (GNMA)
Government National Mortgage Association. A federal association working
with FHA which offers special assistance in obtaining mortgages, and purchases
mortgages in a secondary capacity.
The clause in a law permitting the continuation of a use, business, etc.,
which, when was permissible but, because of a change in the law is now
Rent paid for vacant land. If the property is improved, ground rent is
the portion attributable to the land only.
Heir and Assigns
Words usually found in a deed, showing the interest the grantee is receiving.
Home Owner Association
An association of people who own homes in a given area for the purpose
of improving or maintaining the quality of the area.
Account held by a lender for payment of taxes, insurance, or other
The index if the measure of interest rate changes that the lender uses
to decide how much the interest rate on an ARM will
change over time. You should ask your lender how the index for any ARM
you are considering has change in recent years, and where it is reported.
The term is most important as used to describe the relationship of broker
and salesperson, employee or independent contractor. If employee, the broker
must withhold income tax and pay social security, provide workmen's compensation,
and may be liable for some negligent acts of the salesperson while on the
job. All of this is avoided by the broker if salesperson is an indepent
A tax term used to describe a sale which is usually accomplished by use
of a land contract.
A mortgage insured against loss to the mortgagee in the event of default
and failure of the mortgaged property to satisfy the balance owing plus
costs of foreclosure.
The percentage of an amount of money which is paid for its use for a specified
Joint and Several
A liability which allows the creditor to sue any one of the debtors or
sue all together.
An undivided interest in property, taken by two or more joint tenants.
The interests must be equal, accruing under the same conveyance, and beginning
at the same time. Upon death of a joint tenant the interest passes to the
surviving joint tenants, rather than to the heirs of the deceased.
The decision of a court of law. Money judgments, when recorded, become
a lien on real property of the defendant.
A penalty for failure to pay an installment on time.
Lease with Option to Purchase
A lease under which the lessee has the right to purchase the property.
The option may run for the length of the lease or only for a portion of
the lease period.
A general term encompassing all mortgagees, and beneficiaries under deeds
Letter of Intent
A formal method of stating that a prospective developer, buyer or lessee,
is interested in property.
A latin word for book.
An encumbrance against property for money, either voluntary or involuntary.
An estate in real property for the life of a living person. The estate
then reverts back to the grantor or on to a third party.
A partnership consisting of one or more general partners who conduct the
business and are responsible for losses, and one or more special partners,
contributing capital and liable only to the amount contributed.
A legal notice recorded to show pending litigation relating to real property
and giving notice that anyone acquiring an interest in said property subsequent
to the date of the notice may be bound by the outcome of the litigation.
The information given to the lender regarding the borrower and the property
necessary to decide to give or not to give the loan.
The amount of a loan to the value or selling price of real property.
The ratio of the mortgage loan amount to the properties appraised value
(or the selling price whichever is less).
The number of percentage points the lender adds to the index
to calculate the ARM interest rate at each adjustment.
Title which can be readily marketed to a reasonably prudent purchaser aware
of the facts and their legal meaning concerning liens and encumberances.
A lien created by statue for the purpose of securing priority of payment
for the price of value of work performed and materials furnished in construction
of repair of improvements to land, and which attached to the land as well
as the improvements.
One who for a fee, brings together a borrower and lender, and handles the
necessary applications for the borrower to obtain a loan against real property
by giving a mortgage or deed of trust as security. Also known as a loan
Mortgage Guaranty Insurance Corporation (MGIC)
A private corporation which, for a fee, insures mortgage loans similar
to FHA and VA insurance, although not insuring as great a percentage of
Mortgage or Deed of Trust
Written pledge of real property given by the mortgagor
secure a debt. Should be recorded in the County Recorders Office.
The lender of money or the receiver of the mortgage
The borrower of money or the giver of the mortgage
Insurance required for loans with a loan
A system whereby a mortgage company will hold loans which would ordinarily
be sold, in order to sell later at a lower discount. These are used as
collateral security with a bank to borrow new money to loan.
Amortization means that monthly payments are large enough to pay the interest
and reduce the principal on your mortgage. Negative amortization occurs
when the monthly payments do not cover all of the interest cost. The interest
cost which is not covered by the payment is added to the unpaid principal
balance. This means that even after making many payments, you could owe
more than you did at the beginning of the loan. Negative amortization can
occur when an ARM has a payment cap that results if
monthly payments are not high enough to cover the interest due.
A property which does not conform to the zoning of an area.
A written promise to repay a certain sum of money on specified terms.
Open End Mortgage
A mortgage permitting the mortgagor to borrow additional money under the
same mortgage, with certain conditions, usually, as to the assets of the
A fee or charge for work involved in the evaluation, preparation and submission
of a proposed mortgage loan.
Title insurance for the owner of property, rather than a lienholder.
Mortgage covering both real and personal property.
A mortgage, deed of trust, or land contract, which is given instead of
A release of a portion of property covered by a mortgage.
Perc Test (Percolation)
The test to determine the capability of the soil to absorb liquid, both
for construction and septic systems.
A mortgage on completed construction on the same property under one mortgage
or trust deed.
PMI Private Mortgage Insurance
Insurance similar to FHA or VA insurance, insuring part of the first mortgage
or deed of trust, enabling a lender to make a conventional loan of a higher
percentage of the property value.
A point is equal to one percent of the principal amount of your mortgage.
For example, if you get a mortgage for $100,000, one point is means you
pay $1000 to the lender. Lenders frequently charge points in both fixed-rate
and adjustable-rate mortgages in order to increase the
yield of the mortgage and to cover loan closing costs. These points are
usually collected at closing and may be paid by
the borrower or the home seller, or may be split between them.
Generally, tax levied on both real and personal property.
To divide in proportionate shares, such as taxes, insurance, rent, or other
Purchase Money Mortgage
A Mortgage given by the buyer to the seller as part of the purchase consideration,
as opposed to a hard money mortgage.
Quit Claim Deed
A deed operating as a release; intended to pass any title, interest, or
claim which the grantor may have in the property.
Land and anything permanently affixed to the land, and those things attached
to the building.
Setting forth in a deed or other writing some explanation for the transaction.
The right of the holder of a note secured by a mortgage or deed of trust
to look personally to the borrower or endorser for payment.
The repayment of a debt from the proceeds of a new loan using the same
property as security.
A charge for a title insurance policy if a previous policy on the same
property was issued within a specified period. Reissue is less than the
REIT (Real Estate Investment Trusts)
An entity which purchases property and/or provides mortgages and
offers investors a method in investing in real estate in a group, with certain tax advantages.
An instrument releasing property from the lien of the mortgage, judgment,
Recision of Contract
Annulling a contract and placing the parties to it in a position as if there
had not been a contract.
RESPA (Real Estate Settlement Procedures Act)
A federal statute requiring disclosure of certain costs in the sale of
residential improved property which is to be financed by a federally insured
Formerly federal tax on a sale of real property. Canceled and replaced
by state tax stamps.
A loan secured by a mortgage or trust deed, which lien is junior to another
mortgage or trust deed.
Secondary Mortgage Market
The buying and selling of first mortgages of trust deeds by banks, insurance
companies, government agencies, and other mortgagees.
Real or personal property pledged by a borrower, as additional protection
for the lender's interest.
A sewage system, whereby waste is drained through pipes and a tile field
into a septic tank.
Set Back Ordinance
Regulates the distance from the lot line to the point where improvements
may be constructed.
A statement prepared by broker, escrow, or lender, giving a complete breakdown
of costs involved in a real estate sale.
Deed given at sheriff's sale in foreclosure of mortgage.
Signed Sealed and Delivered
A phrase indicating that everything necessary to convey has been done by
An action to compel the performance of a contract, when money damages for
breach would not be satisfactory.
An involuntary lien, includes tax liens, judgment liens, mechanic liens,
Substitute of Trustee
A document which is recorded to change the trustee under the deed of trust.
Lien for nonpayment of taxes.
Public sale of property at auction by governmental authority, after a period
of nonpayment of property taxes.
Tenancy by the Entirety
A form of ownership by husband and wife whereby each owns the entire property.
In event of death of one, the survivor owns the property without probate.
Often used interchangeably with the term ownership. It indicates the accumulation
of all rights in property, the owner and others.
An insurance policy which protects the insured (purchaser and lender) against
loss arising from defects in title.