Glossary of Debt Related Terms

Balloon (Payment) Mortgage

Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a specific time.

Balloon Note

A note calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as a "balloon" is due at maturity.

Balloon Payment

The unpaid principal amount of a loan due on a specific date in the future. Usually the amount that must be paid in a lump sum at the end of the term.

Bank Draft

A payment method where your loan payment is automatically deducted from your checking or savings account, so you don't have to mail in your payment each month.

Bankrupt

One who is adjudicated a bankrupt by a court having proper jurisdiction. The bankruptcy may be voluntary (petitioned by the bankrupt) or involuntary (petitioned by the creditors of the bankrupt).

Bankruptcy

A proceeding in a federal court in which a borrower who owes more than his or her assets can relieve the debts by transferring his or her assets to a trustee. Different chapters or types of bankruptcy exist. If a person files bankruptcy, a record of the filing appears on the borrower's credit report for up to 10 years.

Before And After Method

An appraisal method used in both condemnation and modernization. In condemnation the method is used in a partial taking. The value of the total land owned by A, for example, is $1.00 per sq. ft. After a partial taking, the remaining land of A is worth $.75 per sq. ft. A should receive $1.00 per sq. ft. for the property taken plus $.25 per sq. ft. for the remaining parcel. In the event the remaining property is worth $1.25 after the taking (increased value), the payment to A could be less than the value of the property taken. In modernization, an appraiser may take the value of property before and after remodeling to determine if the value increased more than modernization costs.

Beneficiary

The Person who is entitled to receive funds of property under the terms and provisions of a will, trust, insurance policy or security instrument. In connection with a mortgage loan the beneficiary is the lender.

Bill Of Sale

An instrument by which title to personal property is transferred or conveyed.

Billing Error

Any mistake in your monthly statement as defined by the Fair Credit Billing Act.

Binder or "Offer to Purchase"

A preliminary agreement, secured by the payment of earnest money, between a buyer and seller as an offer to purchase real estate. A binder secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money is forfeited unless the binder expressly provides that it is to be refunded.

Biweekly

Also known as accelerated mortgages. Biweeklies reduce interest expense and build home equity faster than monthly payments.

Blanket Mortgage

(1) A mortgage covering more than one property of the mortgagor, such as a mortgage covering all the lots of a builder in a subdivision. (2) A mortgage covering all real property of the mortgagor, both present and future. When used in this meaning it is also called a "general mortgage".

Bona Fide Purchaser

A purchaser in good faith. for valuable consideration, without notice or knowledge of adverse claims of others. Sometimes abbreviated B.F.P.

Book Depreciation

Depreciation reserved (on the books) by an owner for future replacement or retirement of an asset.

Borough

A part of a city, having authority over certain local matters. The best known boroughs are the five boroughs of New York City.

Borrower

One who receives funds in the form of a loan with the obligation of repaying the loan in full with interest

Breach Of Warranty

In real property, the failure of the seller to pass title as either expressed or implied (by law) in the conveyancing document.

Breast Height

The height at which the diameter of a tree is measured. A height of 4 1/2 feet above the ground level. The abbreviation D.B.H. (diameter-breast-height) is usually used.

Bridge Loan

A bridge loan is a short-term loan that covers the time between your closing date of a home you are buying and the closing date of the home you are selling. You usually need a contract to sell your current house.

Broker

An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself.

Broker, Real Estate

One who is licensed by the state to carry on the business of dealing in real estate. A broker may receive a commission for his or her part in bringing together a buyer and seller, landlord and tenant, or parties to an exchange.

Building And Loan Association

An organization for the purpose of accumulating a fund by subscription and savings of its members, to assist them with loans for building or purchasing real estate.

Building Line or Setback

Distances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be set by a filed plat of subdivision, by restrictive covenants in deeds or leases, by building codes, or by zoning ordinances.

Business Days

Always contact your institution to find out what days it counts as business days under the Truth in Lending and Electronic Fund Transfer Acts.

Buy-Sell Offer

An offer by one owner of a business or real estate to buy out the interest of another owner of the same business or real estate (a partner or other shareholder), or to sell the offerer's interest at the same price or proportionate price if unequal ownership. Example: A and B each own a 112 interest in lot 1. A offers to buy B's interest for $10,000 or to sell A's interest to B for $10,000. Theoretically very fair, since B has the option to buy or sell. However, B's interest may be worth $12,000, but B is financially unable to buy A's interest (also worth $12,000).

Buydown

When the lender and/or the home builder subsidizes the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.