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.
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.
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.
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 personal guarantee is a legally binding promise by an individual to repay a business debt if the business entity defaults, exposing the guarantor's personal assets to the loan obligation.
A policy loan allows a policyholder to borrow money directly from the cash value of a permanent life insurance policy, using the policy itself as collateral. Unlike traditional loans, it doesn't require credit checks and has flexible repayment terms, making it a unique financing option for real estate investors.
A portfolio lender is a financial institution that originates and holds loans on its own balance sheet, providing flexible underwriting and customized terms for real estate investors, particularly for complex or non-conforming properties.
A portfolio loan is a mortgage originated and held by the lender on its own balance sheet, offering flexible underwriting for unique real estate investment properties that don't fit conventional lending criteria.
A period after a homeowner defaults on their mortgage but before the property is officially repossessed by the lender, offering a critical window for resolution or investment opportunities.
Preferred equity is a hybrid financing instrument in real estate that provides investors with a preferential claim on a property's cash flow and sale proceeds, typically paid before common equity but after senior debt.
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 prepayment penalty is a fee charged by a lender if a borrower pays off a loan earlier than scheduled, compensating the lender for lost future interest income.
The Prime Rate is the interest rate that commercial banks charge their most creditworthy corporate customers, serving as a benchmark for many variable-rate loans and heavily influenced by the Federal Funds Rate.
Principal refers to the original amount of money borrowed for a real estate loan, or the remaining balance of that borrowed amount, excluding interest and fees. It is the core sum that directly reduces debt and builds equity.
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 principal payment is the portion of a loan payment that directly reduces the outstanding balance of the original amount borrowed, contributing to equity growth in real estate.
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