Glossary of Terms

The mortgage glossary helps you understand technical mortgage terms used throughout our website. Please use the menu below to navigate alphabetically to the term you are looking for.


Ad Valorem
Latin for “according to valuation,” usually referring to a type of tax or assessment
A sworn statement reduced to writing and made under oath before a Notary Public or other official authorized by law to administer an oath
The gradual repayment of a debt by means of systematic payments of principal and interest over a set period, where at the end of the period there is a zero balance
Annual Percentage Rate (APR)
The relationship of the total Finance Charge to the total amount to be finance as required under the Federal Truth-in-Lending Law
The process of estimating, fixing, or setting the market value of real property. An appraisal may take the form of a lengthy report, a completed form, a simple letter, or even an oral report
An increase in the worth or value of property due to economic or related causes, which may prove to be either temporary or permanent
Assessed Valuation
The value of real property as established by the state government for purposes of computing real property taxes


A person who receives the benefits from the gifts or acts of another, such as one who is designated to receive the proceeds from a will, insurance policy or trust
Bill of Sale
A written agreement by which one person sells, assigns or transfers his right to, or interest in, personal property to another
Blue Sky Laws
State securities laws designed to protect the public from fraudulent practices in the promotion and sale of securities, e.g., through limited partnerships, syndications, bonds
The perimeters or limits of a parcel of land as fixed by legal description which is usually a metes and bounds description
Breach of Contract
Violation of any of the terms or conditions of a contract without legal excuse; default, non-performance, such as failure to make payment when due
One who acts as an intermediary between parties to a transaction. A real estate broker is a properly licensed person who, for a valuable consideration, serves as an agent to others to facilitate the sale or lease of real property
That aspect of the real estate business which is concerned with bringing together the parties and completing a real estate transaction. Brokerage involves exchanges, rentals, trade-ins and management of property, as well as sales


Clear Title
Title to property that is free from liens, defects or other encumbrances, except those which the buyer has agreed to accept, such as mortgage to be assumed, the ground lease of record, and the like; established title; title without clouds
The final stage of consummating a real estate transaction when the seller delivers title to the buyer, in exchange for the purchase price
Closing Costs
Expenses of the sale which must be paid in addition to the purchase price (in the case of the buyer’s expenses), or be deducted from the proceeds of the sale (in the case of the seller’s expenses)
Closing Statements
A detailed cash accounting of a real estate transaction prepared by an escrow officer or other person designated to process the mechanics of the sale, showing all cash that was received, all charges and credits which were made, and all cash that was paid out in the transaction; also called a settlement statement
The compensation paid to a real estate broker (usually by the seller) for services rendered in connection with the sale or exchange of real property
Compound Interest
Interest which is computed upon the principal sum plus accrued interest
Discounts given by landlords to prospective tenants to induce them to sign a lease
A legal agreement between competent parties who agree to perform or refrain from performing certain acts for a consideration. In real estate, there are many different types of contracts, including listings, contracts of sale, options, mortgages, assignments, leases, deeds, escrow agreements, and loan commitments, among others
A new offer made as a reply to an offer received from another; this has the effect of rejecting the original offer, which cannot thereafter be accepted unless revived by the offeror’s repeating it


A written instrument by which a property owner “grantor” transfers to a “grantee” an ownership in real property
Deed of Trust
A legal document in which title to property is transferred to a third party trustee as security for an obligation owed by the trustor (borrower) to the beneficiary (lender)
Failure to fulfill a duty or promise or failure to perform any obligation or required act. The most common occurrence of default on the part of a buyer or lessee is non-payment of money
Money offered by a prospective buyer as an indication of good faith in entering into a contract to purchase; earnest money; security for the buyer’s performance of a contract
A loss in value due to any cause; any condition which adversely affects the value of an improvement
Discount Points
An added loan fee charged by a lender to make the yield on a lower-than-market interest VA or FHA loan competitive with higher interest conventional loans
Due on Sale Clause
A form of acceleration clause found in some mortgages, especially savings and loan mortgages, requiring the mortgagor to pay off the mortgage debt when selling the secured property, thus resulting in automatic maturity of the note at the lender’s option


A property interest which one person has in land owned by another entitling the holder of the interest to limited use or enjoyment of the other’s land
That interest or value remaining in property after payment of all liens or other charges on the property. A owner’s equity is normally the monetary interest over and above the mortgage indebtedness
The process by which money and/or documents are held by a disinterested third person (a “stakeholder”) until the satisfaction of the terms and conditions of the escrow instructions (as prepared by the parties to the escrow)
The legal process of removing a tenant from possession of the premises for some breach of the lease contract
A transaction in which all or part of the consideration for the purchase of real property is the transfer of property of a like kind
An agreement to continue the period of performance beyond the specified period


Fair Market Value
The highest monetary price which a property would bring, if offered for sale for a reasonable period of time in a competitive market, to a seller who is willing but not compelled to sell, from a buyer, willing but not compelled to buy, both parties being fully informed of all the purposes to which the property is best adapted and is capable of being used
Federal Housing Administration (FHA)
The FHA was set up in 1934 under the National Housing Act to encourage improvement in housing standards and conditions, to provide an adequate home financing system by insurance of housing mortgages and credit, and to exert a stabilizing influence on the mortgage market
Federal Tax Lien
A federal lien which attaches to real property, either if the federal estate tax is not paid, or if the taxpayer has violated the federal income tax or payroll tax laws
Federal Trade Commission (FTC)
A federal agency created to investigate and eliminate unfair and deceptive trade practices in business
Fee Simple
The largest estate one can possess in real property. A fee simple estate is the least limited interest and the most complete and absolute ownership in land: it is of indefinite duration, freely transferable and inheritable. Fee simple title is sometimes referred to as “the fee”
Finance Fee
A mortgage brokerage fee to cover the expenses incurred in placing the mortgage with a lending institution; a mortgage service charge or origination fee
Financial Statement
A formal statement of the financial status and net worth of a person or company, setting forth and classifying assets and liabilities as of a specified date
Finder’s Fee
A fee paid to someone for producing a buyer to purchase or a seller to list property; also called a referral fee
First Refusal, Right Of
The right of a person to have the first opportunity either to purchase or lease real property


A legal process designed to provide a means for creditors to safeguard for themselves the personal property of a debtor which is in the hands of a third party (“garnishee”)
Gross Income Multiplier
A useful rule of thumb to estimate market value of income producing residential property. The multiplier is derived by using comparable sales divided by the actual or estimated monthly rentals and arriving at an acceptable average
Gross Lease
A lease of property under which the lessee pays a fixed rent, and the lessor pays the taxes, insurance, and other charges regularly incurred through ownership


Highest and Best Use
That use which, at the time of appraising the property, is most likely to produce the greatest net return to the land and/or the building over a given period of time
High Rise
A popular expression for a condominium or apartment building generally higher than six stories
Holdover Tenant
One who stays on the leased premises after his lease has expired. The landlord normally has the choice of evicting the holdover tenant or permitting him to remain and continue to pay rent
homeowner’s Association
A non-profit association of homeowners organized pursuant to a declaration of restrictions or protective covenants for a subdivision, a PUD, or a condominium
HUD (Department of Housing and Urban Development)
A federal cabinet department officially known as the Department of Housing and Urban Development
To pledge specific real or personal property as security for an obligation, without surrendering possession of it


Imputed Interest
Interest implied by the federal tax law
Income Approach
An approach to the valuation or appraisal of real property as determined by the amount of net income the property will produce over its remaining economic life
Income Property
Property purchased primarily for the income to be derived plus certain tax benefits, such as accelerated depreciation. Income property can be commercial, industrial or residential
A visit to and review of the premises. A prudent purchaser of property always inspects the premises before closing
Institution Lender
Financial institutions such as banks, insurance companies, savings and loans or any lending institution whose loans are regulated by law
The sum paid or accrued in return for the use of money


Judgement Lien
A lien binding on all the real estate of a judgment-debtor and giving the holder of the judgment a right to levy (i.e. to seize) the land for satisfaction of the judgment
Junior Mortgage
A mortgage which is subordinate in right or lien priority to an existing mortgage on the same realty, such as a second mortgage
The authority or power to act, such as the authority of a court to hear and render a decision that binds both parties
Just Compensation
An amount of compensation to be received by a party for the taking of property under the power of eminent domain


The surface of the earth extending down to the center and upward to the sky, including all natural things thereon such as trees, crops, or water; plus the minerals below the surface and the air rights above
Shrubs, bushes, trees and the like, on the grounds surrounding a structure
A lease is both a contract between lessor (landlord) and lessee (tenant) and a conveyance or demise of the premises by the lessor to the lessee. A lease is a contract in that item bodies the agreement between the parties
Letter of Credit
An agreement or commitment by a bank (“issuer”) made at the request of a customer (“account party”)that the bank will honor drafts or other demands of payment from third parties (“beneficiaries”) upon compliance with the conditions specified in the letter of credit
Letter of Intent
An expression of intent to invest, develop or purchase without creating any firm legal obligation to do so
Line of Credit
A maximum amount of money a bank will lend one of its more reliable and credit worthy customers without need for any formal loan submission
The ability to sell an asset and convert it into cash at a price close to its true value
A written employment agreement between a property owner and a broker authorizing the broker to find a buyer or a tenant for a certain real property
Loan-to-Value Ration
The ratio that the amount of the loan bears to the appraised value of the property or the sales price, whichever is lower


Market Value
The highest price, estimated in terms of money, which a property will bring if exposed for sale in the open market, allowing a reasonable time to find a purchaser who buys with knowledge of all the uses to which the property is adapted and for which it is capable of being used
Master Plan
A comprehensive plan to guide the long-term physical development of a particular area
A legal document used to secure the performance of an obligation. In effect, the mortgage states that the lender can look to the property in the event the borrower defaults in payment of the note
Mortgage Banker
A corporation or firm which normally provides its own funds for mortgage financing
Mortgage Broker
A person or firm which acts as an intermediary between borrower and lender; one who, for compensation or gain, negotiates, sells or arranges loans and sometimes continues to service the loans
The one who receives and holds a mortgage as security for a debt; the lender; a lender or creditor who holds a mortgage as security for payment of an obligation


National Association of Realtors
Formerly known as the National Association of Real Estate Boards (NAREB), it is the largest and most prestigious real estate organization in the world
The transaction of business aimed at reaching a meeting of minds among the parties; bargaining
Net Income
The sum arrived at after deducting from gross income the expenses of a business or investment, including taxes and insurance, and allowances for vacancy and bad debts; what the property will earn in a given year’s operation


Offsite Costs
Costs such as for sewers, streets, utilities, etc, which are incurred in the development of raw land, but are not connected with the actual construction of the buildings (onsite costs)
Open-end Mortgage
A mortgage in which the borrower is given a limit up to which he may borrow, with any incremental advances of money up to but not exceeding the original borrowing limit to be secured by the same mortgage
Open House
The common real estate practice of showing a listed home to the public during established hours, frequently on Sunday afternoons
Open Listing
A listing given to any number of brokers. The first broker who secures a buyer ready, willing and able to purchase at the terms of the listing is the one who earns the commission
Origination Fee
The finance fee charged by a lender for placing a mortgage, which covers initial costs such as preparation of documents and credit, inspection and appraisal fees


Personal Property
Things which are tangible and moveable; property which is not classified as real property; chattels; personality
Piggyback Loan
A joint loan with two lenders sharing a single mortgage
Planned Unit Development (PUD)
A modern concept in housing designed to produce a high density of dwellings and maximum utilization of open spaces
A map of a town, section, or subdivision indicating the location and boundaries of individual properties
Pocket Listing
A listing which is retained by the listing broker or salesperson, who does not make it available to other brokers in the office or to other Multiple Listing Service members
A generic term for a percentage of the principal loan amount which the lender charges for making the loan; each point is equal to one percent of the loan amount
Prepaid Interest
The paying of interest before it is due
The capital sum; interest is paid on the principal. NOT spelled principle
Principal Broker
The licensed broker directly in charge of and responsible for the real estate operations conducted by a brokerage company
Private Mortgage Insurance
A special form of insurance designed to permit lenders to increase their loan-to-market-value ratio, often up to 95 percent of the market value of the property
To divide or distribute proportionately
Purchase Money Mortgage
A mortgage given to the seller as part of the buyer’s consideration for the purchase of real property, and delivered at the same time that the real property is transferred as a simultaneous part of the transaction


Qualified Fee
An estate in fee which is subject to certain limitations imposed by the owner


A registered word which may only be used by an active real estate broker who is a member of the state and local real estate board affiliated with the National Association of Realtors. The use of the name REALTOR and the distinctive seal in advertising is strictly governed by the rules and regulations of the National Association
Redemption, Equitable Right of
The right of a mortgagor who has defaulted on the mortgage note to redeem or get back his title to the property by paying off the entire mortgage note prior to the foreclosure sale
Reduction Certificate
An instrument which shows the amount of the unpaid balance of a mortgage, the rate of interest and the date of maturity
The act of obtaining a new loan to pay off an existing loan; the process of paying off one loan with the proceeds from another
A legal action to correct or modify a contract or deed which has not accurately reflected the intentions of the parties due to some mechanical error, such as a typo graphical error in the legal description
Renewal Option
A covenant in some leases which gives the lessee the right to extend the lease term for a certain period, on specified terms
Reproduction Cost
The cost, on the basis of current prices, of reproducing a new replica property with the same or fairly similar material


Second Mortgage
A mortgage which is junior or subordinate to a first mortgage; typically, an additional loan imposed on top of the first mortgage, which is taken out when the borrower needs more money
Security Deposit
Money deposited by or for the tenant with the landlord, to be held by the landlord for the following purposes: to remedy tenant defaults for damage to the premises (be it accidental or intentional), for failure to pay rent due, or for failure to return all keys at the end of the tenancy
Standing Loan
A commitment by the interim or construction lender to keep the money already funded in the project for a specified period of time after the expiration of the interim loan, usually until permanent take-out financing is secured
Statute of Limitations
That law pertaining to the period of time within which certain actions must be brought to court


Title Insurance
A comprehensive contract of indemnity under which the title company agrees to reimburse the insured for any loss if title is not as represented in the policy


Unilateral Contract
A contract in which one party makes an obligation to perform without receiving in return any express promise of performance from the other party, such as an open listing contract, where the seller agrees to pay a commission to the first broker who brings in a ready, willing and able buyer


A guaranty by the seller, covering the title as well as the physical condition of the property
Warranty Deed
A deed in which the grantor fully warrants good clear title to the premises. Also called a general warranty deed