This is an up-front fee that some brokers and lenders charge to accept an loan application. It may or may not be applied to third-party costs such as a property appraisal or legal fees, and it may or may not be refundable if the lender declines the loan or the borrower refuses to accept the loan.
The ARV, or After Repair Value, is the value of a property in need of rehabilitation once the rehabilitation has been accomplished and the property is ready for market in its improved condition. This acronym is used most often by real estate investors and hard money lenders involved in the fix and flip end of the real estate business.
This is a fee charged by some lenders when the loan is re-paid, sometimes referred to as an exit fee. If applicable, it is generally a percentage of the loan amount.
A bridge loan is short-term financing that “bridges” the gap between the time you purchase a property and arrange for permanent financing or sell. Private loans or hard money loans are often referred to as bridge loans.
Borrowing more than the amount necessary to pay off the remaining balance of an existing note is referred to as a cash-out refinance. The borrower leaves the closing table with cash. I will entertain making this type of loan.
The asset(s) pledged by a borrower to secure repayment of a debt. In my case, real estate is the only acceptable collateral.
Agreement under which a borrower (the trustor) conveys the right of ownership of his/her property to a trustee as a security for a loan from a lender (the beneficiary of the trust). If the loan is paid back as agreed, the trustee re-conveys the title to the trustor, i.e releases the deed of trust. If not, the trustee has the legal power to sell (liquidate) the property at a public sale to repay the lender.
Failure of the borrower to honor one or more of terms in the loan documents is considered a default and can cause the loan to become immediately due and payable.
A loan guaranty is a promise by a person or an entity to assume a debt obligation in the event of nonpayment by the borrower. The person or entity that guarantees the loan is referred to as the guarantor.
The LTV, or loan to value, is the relationship between the loan amount and the value of the property used as collateral, expressed as a percentage (loan amount/property value). Example: If the loan amount is $200,000 and the property is worth $400,000, the LTV is 50%.
The origination fee is that charged by a lender, usually expressed as a percentage of the loan amount, for the work involved in evaluating, processing, documenting and funding a loan.
The origination fee is often expressed as points rather than a percentage of the loan amount. For example, 2 points means a fee equal to 2% of the loan amount.
A prepayment charge, or penalty, is that sometimes imposed by a lender if the borrower pays off the loan prior to the maturity date. The charge can be expressed as a percent of the loan balance at the time of prepayment, a specified number of months of interest or a fixed amount.
A promissory note is legal document containing an unconditional promise by the maker (borrower) to pay a certain sum of money to a holder of the note (lender) on demand or at a specified future date.
