Real Estate Glossary

  • Acceleration Clause– allows the lender to demand immediate payment of the outstanding loan balance if the borrower defaults, misses payment, or when/if the home is sold
  • Adjustable rate mortgage– Mortgage loans in which the interest rate is adjusted periodically based on predetermined factors such as an assigned index or designated market factor. There is typically a limit to how often and by how much the interest can fluctuate.
  • Appraisal, Approved Value– an appraiser’s estimate of the value of the property. Banks require appraisals to determine how much money it will lend you
  • Appreciation– An increase in the value of a property due to changes in market conditions or for other reasons, such as additions and renovations.
  • Betterment- An improvement that increases a property’s value, different from routine home maintenance and repairs.
  • Bill of sale- A written document that attests the transfer of the ownership of personal property
  • Buy down- A fixed-rate mortgage where the interest rate is “bought down” for a temporary period, usually one to three years. After that time, the borrower’s payment is calculated at the note rate. In order to temporarily buy down the initial rate, a lump sum is paid to the lender and held in an account used to supplement the borrower’s monthly payment. these funds usually come from the seller as an incentive to induce someone to buy their property.
  • Capital improvement- any item, structure, or addition which is a permanent improvement to the property
  • Chain of title– The history of all of the title transfers to a piece of real estate
  • Comps, comparables– Comparable properties; properties in close proximity which have sold recently that are about the same six with similar amenities, used to determine value of a property by comparison
  • Contract of sale– Agreement between the buyer and seller which conveys title after certain conditions are met, outlining purchase price, terms, etc.
  • Down payment– Usually 10-20 percent of sales prices paid by the buyer at the time of purchase. Comprises the difference between the purchase price and the mortgaged amount
  • Encumbrance- A lien or claim on a property
  • Equity– The value an owner has in real estate over and above the debt of the property. For example, if a homeowner owns a house valued at $100,000 and has a mortgage balance of $20,000, the homeowner’s equity is $80,000. The homeowners equity increases or decreases accordingly as the value of the house increases or decreases. The lender’s equity is equal to the value of the outstanding loan.
  • Escrow- Funds that are set aside and held in trust. usually used for payment of taxes, insurance, etc.
  • Fixed-rate mortgage- A mortgage with a set interest rate for the entire loan, regardless of interest rate fluctuations. This creates consistent, predictable payments, but it’s not always the cheapest option
  • Home inspection– A complete and thorough inspection of the physical condition of a property, including all major systems and structural elements, conducted by someone who knows what to look for and who will disclose the findings to you
  • Homeowner’s insurance– An insurance policy required by many lenders when you take ownership that combines personal liability insurance and hazard insurance for the home as well as its contents
  • Interest- The amount of money charged for the use of the money borrowed
  • Lien– A claim upon real or personal property for the satisfaction of some debt or obligation
  • Market Value- the amount that a seller may expect to obtain in the open market
  • Refinance- Obtaining a new mortgage loans on a property
  • Title Insurance- Insurance, usually issued by a title insurance company, which insures a homebuyer against errors in the title search. The cost of the policy is usually a percentage of the property value