As a private lender, it is essential to be familiar with some of the terms used in the industry when carrying out transactions and particularly giving out loans. Most of these terms come up on the standard document request form, which clients fill out before drafting loan documentation.
- Amortization: The accounting practice of lowering the book value of a loan regularly over a predetermined length of time.
- Collateral Asset: A loan is collateralized when a borrower’s asset is utilized to secure the loan. If the Borrower can’t pay back the loan, the lender is guaranteed an alternative source of repayment in the form of collateral.
- Balloon Payment: Interest-only payments are made each month, with the outstanding principal balance repaid after the loan period.
- Default Rate: If a borrower defaults a payment when due or a case of default occurs as defined in the terms and agreement of the loan, the default rate will be charged to the pending interest until the default is sorted. It usually is higher than the standard interest rate.
- Lien Seniority: This describes the priority status of a lien’s liquidation regarding other obligations on the property. When the Borrower’s credit obligations are paid, the loan has a greater priority than the senior lien. As a result, lenders frequently demand first-position loans.
Other commonly used terms that lenders need to get used to include maturity date, prepayment penalty, interest rate, and guarantor. To get more understanding of required lending terms as a lender, click here.
https://geracilawfirm.com/dictionary-of-lending-terms/
About Note Servicing Center
Note Servicing Center provides professional, fully compliant loan servicing for private mortgage investors so they can avoid the aggravation of servicing their own loans and just relax and get paid.
Contact us today for more information.
Share This Story, Choose Your Platform!
Related Posts
Disclaimer
The information provided in this article is for general educational and informational purposes only and does not constitute legal, financial, investment, tax, or professional advice. Note Servicing Center, Inc. is a licensed loan servicer and does not provide legal counsel, investment recommendations, or financial planning services. Reading this content does not create an attorney-client, fiduciary, or advisory relationship of any kind.
Nothing in this article constitutes an offer to sell, a solicitation of an offer to buy, or a recommendation regarding any security, promissory note, mortgage note, fractional interest, or other investment product. Any references to notes, yields, returns, or investment structures are illustrative and educational only. Past performance is not indicative of future results, and all investments involve risk, including the potential loss of principal.
Note investing, real estate transactions, and lending activities are subject to federal, state, and local laws that vary by jurisdiction and change over time. Before making any decision based on the information in this article, you should consult with a qualified attorney, licensed financial advisor, certified public accountant, or other appropriate professional who can evaluate your specific circumstances.
While we make reasonable efforts to ensure the accuracy of the information presented, Note Servicing Center, Inc. makes no warranties or representations regarding the completeness, accuracy, or current applicability of any content. We disclaim all liability for actions taken or not taken in reliance on this article.