A loan, which is amortized for a longer period than the term of the loan. Usually this refers to a thirty-year amortization and a five or seven-year term. At the end of the term of the loan, the remaining outstanding principal on the loan is due. This final payment is known as a balloon payment.
The final lump sum paid at the maturity date of a balloon mortgage.
A mortgage whereby the borrower pays one half of the monthly payment on the first day of the month and pays the remaining half on the 15th.
A mortgage whereby the borrower pays one half the monthly payment every two weeks. As this results in 26 payments per year instead of 24, the biweekly mortgage amortizes before term.
Term used to describe borrowers with one or more of the following risk factors: they are only able to make a very small or no down payment; they are unable to fully document their income and assets; the property is something other than a single-family home; the loan is intended to raise cash or to purchase an investment property; their credit scores are low; they have a low income relative to their expected total obligations; and they carry an adjustable rate mortgage that will result in substantially higher payments within a few years.
One who applies for and receives a loan in the form of a mortgage with the intention of repaying the loan in full.
Also known as a “swing loan,” this is a short-term loan, usually from a bank used to “bridge” the period between the closing date of a home purchase and the closing date of a home sale. It is a second trust that is collateralized by the borrower’s present home allowing the proceeds to be used to close on a new house before the present home is sold. Unsecured bridge loans are available if the borrower has a firm contract to sell the existing house. Secured bridge loans are available without such a contract.
In a permanent buy-down the borrower may pay higher upfront costs in the form of points in exchange for a lower overall interest rate (See Points). A temporary buy-down concentrates the rate reduction in the early years (See Temporary Buy-Down).
The payment of a higher interest rate in exchange for a rebate by the lender in order to reduce upfront costs
An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.