Real Estate Unit 12

Virginia

Acceleration Clause

A mortgage provision allowing lenders to demand immediate repayment of the entire outstanding loan balance, including interest, if the borrower breaches the contract, typically by missing payments.

Adjustable-Rate Mortgage (ARM)

A home loan with an interest rate that changes periodically, unlike fixed-rate loans where the rate stays the same, ARMs typically start with a lower fixed interest rate for an introductory period and then adjust up or down based on a market index, often with built-in caps on how much the rate can change.

Alienation Clause

A mortgage provision requiring full repayment of the outstanding loan balance upon the sale or transfer of the property.

Amortized Loan

A mortgage structured to by fully repaid through regular, fixed, monthly payments of principal and interest over a set term.

Assumption of Mortgage

Allows a buyer to take over a seller’s existing mortgage, stepping into the seller’s shoes to continue making payments on the original loan terms, interest rate, and balance, which is beneficial when current rates are higher.

Balloon Payment

A large, lump-sum payment due at the end of a short-term loan (typically 5-10years). While offering lower initial monthly payments or interest-only payments, the final “balloon” payment covers the remaining principal balance.

Beneficiary

An individual or entity designated to receive property, assets, or financial benefits from a trust, will, or deed.

Comprehensive Loss Underwriting Exchange (CLUE)

A LexisNexis-generated database detaining up to seven years of homeowners’ insurance claims on a specific property.

Debt to Income (DTI)

A percentage calculating how much a borrower’s gross monthly income goes toward paying debt, including mortgage, taxes, insurance, and other loans.

Deed in Lie of Foreclosure

A voluntary real estate transaction where a borrower transfers the property title directly to the lender to satisfy the outstanding mortgage debt and avoid a formal foreclosure proceeding.

Deed of Reonveyance

A legal document that transfers property title back to the original owner (borrower) from the trustee after a mortgage or deed of trust loan is fully paid off, effectively clearing that lien and confirming the borrower’s full ownership.

Deed of Trust

Three-party instrument used in real estate transactions to secure a loan by transferring the property title to a trustee, who holds it as collateral for the lender (beneficiary) until the borrower (trustor) repays the debt.

Defeasance Clause

A mortgage provision requiring the lender to transfer the property title to the borrower once the loan is fully paid.

Deficiency Judgement

A court order requiring a borrower to pay the remaining balance on a loan when the foreclosed property sells for less than the total amount owed.

Discount Points

Prepaid interest, where one point equals 1% of the is total loan amount, paid upfront at closing to reduce a mortgage’s interest rate and lower monthly payments.

Equity

An investor-owned luxury vacation club where members invest in a diversified portfolio of high-end, deeded residential real estate, rather than purchasing a single property or timeshare.

FICO Score

a 300-850 numerical representation of a borrower’s creditworthiness, used by>90% of lenders to determine mortgage eligibility, interest rates, and loan terms.

Forbearance

Is a temporary agreement with a mortgage lender to pause or reduce mortgage payments during a financial hardship, like job loss or disaster, allowing you time to recover without facing foreclosure; however, you must still repay the missed amounts later through options like a lump sum, repayment plan, or deferral.

Foreclosure

The legal process where a lender seizes a property (collateral) after a borrower defaults on mortgage payment, forcing a sale to recover the outstanding loan balance.

Growing-Equity Mortgage

A fixed-rate loan with scheduled annual payment increases, where the additional funds are applied directly to the principal balance.

Homeowners insurance

A package policy protecting residential real estate against financial loss from damage, theft, or liability, typically required by lenders.

Hypothecation

A legal arrangement where a borrower pledges an asset (typically property) as collateral to secure a loan without transferring title or possession to the lender.

Index

A numerical, statistical measure used to track changes in property values, market trends, or to compute interest rates for loans.

Interest

Defines the degree, quantity, nature, and extent of a person’s rights, ownership, or legal claims in land, often described as a “bundle of sticks.”

Interest-only Loan

Common in real estate is a mortgage where the borrower pays only the interest for a set period (typically 5-10 years), resulting in lower initial monthly payments.

Loan origination Fee

An upfront, one-time charge by lenders, typically 0.5% to 1% of the total loan amount, to process, underwrite, and fund a mortgage.

Loan-to-Value ratio (LTV)

The balance of your mortgage loan divided by the value of the property you’re buying, usually expressed as a percentage

Margin

The difference between the purchase price of a property and its selling price, expressed as a percentage.

Mortgage

A legal agreement where a lender (mortgagee) loans money to a borrower (mortgagor) to purchase or refinance real estate, with the property serving as collateral.

Mortgagee

The lender in a mortgage, typically a bank

Mortgagor

The borrower in a real estate mortgage transaction, typically a homebuyer property owner, who pledges their property as collateral to a lender (the mortgagee) to secure a loan.

Negative Amortization

Occurs when a borrower’s mortgage payment is insufficient to cover the interest due.

Negotiable Instrument

A written promise to pay a set amount of money, transferable to others, simplifying debt collection or financing beyond a simple contract by offering holder-in-due-course status, meaning new owners often take it without typical defenses, though specific notes might be tied to property rights or be less freely traded than checks.

Note

A legally binding, signed document outlining a borrower’s promise to repay a home loan, including the principal amount, interest rate, and payment schedule.

Novation

The legal process of replacing an existing contract, obligation, or party with a new one, extinguishing the original agreement entirely.

PITI

Principal, interest, taxes, and insurance provide a complete picture of housing cost beyond just the loan repayment.

Prepayment Penalty

A fee charged by lenders if a borrower pays off the mortgage entirely or significantly reduces the principal balance before a specified timeframe, usually within the first 3-5 years.

Promissory Note

A legally binding document, essentially a formal IOU, signed by the borrower to repay a mortgage loan under specific terms.

Release Deed

A legal document that voluntarily surrenders a person’s rights, claims, or interest in a specific property to another party.

Reverse Mortgage

A specialized, non-recourse home loan for homeowners aged 62 or older that converts home equity into tax-free cash (lump sum, line of credit, or monthly payments) without requiring monthly repayments.

Satisfaction of Mortgage

A legal document providing you’ve fully paid your home loan, which removes the lender’s lien (claim) on your property, making your title clear and allowing you to own the home “free and clear”

Short Sale

Occurs when a homeowner in financial distress sells their property for less than the outstanding balance on their mortgage, requiring lender approval.

Straight Loan

In real estate, an interest-only loan where the borrower makes periodic interest payments during the term, with the entire principal balance due in a single lump sum “balloon payment” at maturity.

Subject to

Buyer purchases a property by taking over the seller’s existing mortgage payments, without formally assuming the loan or getting a new one.

Trustee

An individual or entity (like a bank) holding legal title to property, responsible for managing, maintaining, or selling it for the benefit of beneficiaries according to a trust agreement.

Trustor

An individual or entity that establishes a trust, defining its term and transferring assets into it for the benefit of named beneficiaries.

Usury

The illegal action or practice of lending money at unreasonable high rates of interest.