Loan types and clauses – key terms

Question 1

A clause and loan documents that allows the lender to call the note all due and payable if the borrower breaches the terms

Answer 1

Acceleration clause

Question 2

A mortgage loan that has an interest rate on the note that periodically adjust based on an index that reflects the cost to the lender

Answer 2

Adjustable rate mortgage (ARM)

Also called variable rate mortgage

Question 3

A clause used in a financing document allowing the lender to demand the full and immediate payment of the mortgage because the owner transferred ownership of the property

Answer 3

Alienation clause

Also called due on sale clause

Question 4

1/100 of 1%, used chiefly when quoting interest rates

Answer 4

Basis point

Question 5

A single mortgage loan where two or more different parcels of property are offered as security for the loan

Answer 5

Blanket loan

Question 6

Temporary financing used during construction of a building; a short term loan

Answer 6

Construction loan – also called interm loan

Question 7

Clause used to give a borrower the right to redeem real estate after default on a note by paying the full amount due plus fees and court costs

Answer 7

Defeasance clause

Question 8

A short term loan that occurs between the termination of one loan in the beginning of another

Answer 8

Gap loan – also called bridge loan or swing loan

Question 9

Alone in which the borrower is not held personally liable for the debt

Answer 9

Nonrecourse loan

Question 10

A loan allowing the borrower to request more funds from the lender, up to a certain predefined limit, without having to renegotiate the loan

Answer 10

Open-End loan

Question 11

Alone where personal property, such as appliances, is included in the property sale in finance together with one loan

Answer 11

Package loan

Question 12

A loan to a buyer from the seller as a portion of, or for the entire amount of, the purchase price of a property

Answer 12

Purchase money mortgage – also called seller financing or owner financing

Question 13

A loan that allows qualified homeowners age 62 or older to convert home equity into a lump sum, a monthly cash stream, or a line of credit; loan do when the last surviving borrower dies, sells the home, or ceases to live in the home for 12 consecutive months

Answer 13

Reverse annuity loan - Also called reverse mortgage

Question 14

A contract clause that gives a mortgage recorded at a later date the right to take priority over an earlier recorded mortgage

Answer 14

Subordination clause

Question 15

Long-term financing that is used to pay off a construction loan when construction is complete

Answer 15

Take–out loan

Question 16

A carry back financing arrangement in which an existing loan on a property is retained while the buyer makes a payment large enough to cover the existing loan and new obligation

Answer 16

Wraparound