Real Estate Glossary

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Real Estate Glossary of Terms H - O

Terms H-O

Hazard Insurance

Also called Homeowners Insurance, it is designed to cover damage due to fire, wind, vandalism, theft, etc.

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Heavy Industrial

Manufacturing properties comprise the heavy industrial segment. Frequent uses of such properties are: auto making, textiles, steel, chemicals, and food processing. Typically zero to five percent office space.

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High-Rise Apartments

A descriptive term for an apartment building in excess of ten stories, with underground parking, security, and a standard floor plan.

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Home Warranty Insurance

Private insurance insuring a buyer against defects (usually in plumbing, heating and electrical) in the home purchased. Although the period of insurance varies and both new and used homes may be insured.

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Impound Account

See Escrow

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Income Ratio

Used to determine qualification for mortgage loans, this ratio accesses the allowable housing costs in relationship to a borrower's monthly income.

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Index

Any rate published by an independent third party (the government, the federal bank, etc.) which serves as the measuring device used to determine if interest rates have gone up or down over time. A wide variety of indexes may be used with Adjustable Rate Mortgages.

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Initial Note Rate

The mortgage note rate at the inception of the mortgage. This rate will change periodically according to the index and the period of time for which it is guaranteed.

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Insurance of Title

Insurance as to who owns a specified interest in designated real estate, and showing as exceptions to the insured interest the defects, liens and encumbrances which exist as against that insured interest.

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Interest Cap

It is a type of consumer protection that limits the amount of interest that a loan may be increased or decreased. Yearly interest caps and life of loan caps are available with many loans today.

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Interest Rate Buydown

A technique of reducing the effective interest charged to a borrower. It involves the payment of money to a lender to reduce the borrower's interest rate either temporarily or permanently. This would help reduce the buyer's payments and help him qualify for the loan.

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Interim Financing

A temporary construction loan made during the completion of a home or building, which is usually replaced by a permanent loan after completion and/or sale of the property. It also may be referred to as a short-term loan or a bridge loan.

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Investment Return

The amount by which your investment gains or loses (capital appreciation/depreciation and dividend or coupon income) over a given period of time. Usually expressed as a percentage of the original amount invested. A five-percent return means you earned five dollars for every $100 you invested in the stated time period. Investment return can be measured over a variety of timeframes (i.e., one-year, five-years, 10-years, etc.)

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Lien

A legal claim or security instrument against property for moneys owed.

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Life of Loan Cap

Limits the amount that a loan rate can change throughout the entire life or term of the loan. A typical life of the loan in use today would be a 5% interest rate cap.

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Light Industrial/Assembly

Production lines that assemble components produced elsewhere and light manufacturing are based in light industrial/assembly facilities. Office space is usually less than ten percent.

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Loan Origination Fee

A one-time set-up fee charged by the lender to cover the direct costs of arranging the loan.

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Lock-In Rate

Some lenders will obtain a commitment from a lender to guarantee a certain interest rate or other loan feature for a set period of time, usually from thirty days to one year for a prepaid fee. This can protect a borrower from interest rates rising while the application and closing takes place.

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Market Value

A price estimate obtained for a particular asset if it were sold in an arm's length transaction on the current market. For Real Estate: The likely price a buyer is willing to pay for a property and the likely price a seller will accept for the property in question.

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Mechanics Lien

A lien or claim placed on a property as security for payment for work performed in the construction of the property and is not compensated for that work.

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Mid-Rise Apartments

Six to ten story buildings that are serviced by elevators, usually have an inner city or dense suburb, and have a limited range of unit types.

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Mortgage

A legal document secured against property to the lender for payment of a debt. It is a two party agreement as opposed to the three party agreement of a deed of trust.

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Mortgage Yours

Individual lenders who originate mortgages exclusively for resale in the secondary mortgage market. These are often sold to investors such as insurance companies and Fannie Mae.

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Mortgage Insurance Premium (MIP)

An insurance premium paid by the borrower on a policy that promises to pay out the amount owing in the event that the borrower defaults.

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Mortgage Note

A written agreement, secured by a mortgage, serves as proof of indebtedness, and states the manner in which a loan is repaid.

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Mortgagee (Lender)

The lender of money to purchase real estate in a mortgage transaction. One who holds a mortgage on real estate.

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Mortgagor

The borrower of money to purchase real estate in a mortgage transaction

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Mortgage Information Letter (MIL)

A letter issued by the lender indicating the payoff balance of a loan as well as any other requirements of loan payoff.

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Multiple Listing Service (MLS)

The service created and run by professionals which combines the all available listings in an area, except For Sale By Owner (FSBO) properties, in one directory or database.

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Negative Amortization

When the periodic payments on a loan are not sufficient to pay the interest which has accumulated. This results in an increase rather than a decrease in the amount owing on the mortgage. Also referred to as a deferred interest.

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Note

A legal document that obligates a borrower to repay a debt, such as a mortgage note.

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Note Rate

The interest rate as set out in the mortgage that must be paid back on the mortgage note in addition to the principal amount owed.

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Office/Warehouse or Research & Development

Properties that have lab facilities, offices, warehouse facilities, or personal services such as carpentry or machine repair are typically research and development or office/warehouse properties. Each property usually allows a variable combination of office and other uses.

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Origination Fee

A fee paid to the lender for processing a loan application. The origination fee is stated in the form of points and usually amounts to 1% of the loan applied for.

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Real Estate Glossary