Loan types, lending terms, mortgage products, hard money lending, and financing strategies for real estate.
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Foundation terms you need to know first (57 terms)
A traditional bank mortgage is a conventional loan provided by a financial institution to purchase real estate, following guidelines from Fannie Mae and Freddie Mac, commonly used by investors to finance properties.
Principal paydown is the portion of your mortgage payment that reduces the outstanding loan balance, directly building equity in your real estate investment over time.
A repair credit is a financial concession from a seller to a buyer at closing, typically used to cover the cost of necessary repairs identified during a home inspection, reducing the buyer's upfront cash needed.
An owner-occupied property is real estate where the owner lives as their primary residence, often qualifying for favorable financing, lower down payments, and significant tax benefits.
A credit bureau is a company that collects and maintains financial information about individuals, compiling it into credit reports used by lenders to assess creditworthiness.
Complex strategies and professional concepts (44 terms)
Slow BRRRR is an advanced real estate investment strategy that extends the traditional BRRRR (Buy, Rehab, Rent, Refinance, Repeat) cycle over a longer period, often several years, to maximize equity appreciation and mitigate market risks.
A legally binding contract that alters the priority of liens on a property, allowing a senior lienholder to voluntarily place their claim in a junior position to another, typically to facilitate new financing or complex transactions.
Tax-exempt debt refers to bonds or other debt instruments issued by governmental entities or qualified private entities, where the interest earned by the bondholder is exempt from federal, and often state and local, income taxes.
Capital stacking is an advanced real estate financing strategy involving the layering of multiple debt and equity instruments to fund a property acquisition or development, optimizing the capital structure for specific risk-return profiles.
Premium financing is a sophisticated financial strategy where an investor borrows funds from a third-party lender to pay the premiums on a large insurance policy, typically a life insurance policy or substantial commercial property insurance, using the policy itself or other assets as collateral.
A beneficiary is an individual, group, or entity designated to receive assets, property, or benefits from a will, trust, life insurance policy, or other legal instrument.
A Bermuda Mortgage Prepayment Option grants the borrower the right, but not the obligation, to prepay their mortgage principal on specific, predetermined dates throughout the loan's term, offering flexibility beyond a standard European option but less than an American option.
A bid bond is a financial guarantee provided by a surety company to a project owner, ensuring that a bidder will enter into a contract if awarded, and provide the required performance and payment bonds. It protects the owner from financial loss if the winning bidder defaults on these obligations.
A Bill of Exchange is a legally binding written order from one party (the drawer) to another (the drawee) to pay a specified sum of money to a third party (the payee) on demand or at a predetermined future date, serving as a negotiable instrument in sophisticated financial transactions, including real estate.
A blanket mortgage is a single loan secured by multiple parcels of real estate, often used by developers or investors acquiring several properties simultaneously, featuring a crucial release clause for individual property sales.
The bond market is a financial market where debt securities are issued and traded, influencing interest rates, mortgage costs, and property valuations for real estate investors.
A borrower is an individual or entity who receives funds from a lender with the promise to repay the money, typically with interest, according to the terms of a loan agreement.
A borrowing base is a dynamic calculation used in asset-based lending (ABL) to determine the maximum amount a borrower can draw from a credit facility, based on the value of eligible collateral assets, primarily real estate in investment contexts.
Borrowing costs are the expenses incurred when taking out a loan or using credit, primarily consisting of interest payments and various fees charged by lenders.
Borrowing power refers to an individual's or entity's capacity to secure financing from lenders, representing the maximum loan amount they can obtain based on financial health and creditworthiness.
Business credit is a credit profile established for a business entity, separate from its owner's personal credit, used to secure financing and establish credibility for commercial activities.
A financial tool for businesses to manage expenses, separate personal and business finances, and build business credit history.
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