Property Classification: Most lenders will classify a property by its age and needed maintenance. As an example many insurance companies will only loan on properties that are class A, meaning that the properties age is 10 years old or less and is not in need of repair. Property Tax: Taxes based on the market value of a property. Property taxes vary from state to state. Rate Index: An index used to adjust the interest rate of an adjustable mortgage loan (e.g., the changes in U.S. Treasury securities (T-bill) with 1-year maturity. The weekly average yield on said securities, adjustable to a constant maturity of 1 year, which is the result of weekly sales, may be obtain weekly from the Federal Reserve Statistical Release H.15 (519). This changes in interest rates is the "index" for the change in a specific Adjustable Mortgage Loan). Recourse: A loan for which the borrower is personally liable for payment is the borrower defaults. REIT (Real Estate Investment Trust): Pooled funds that purchase and hold commercial real estate. Refinance: The renewal of an existing loan by the some borrower. Rent Step - Up: A lease agreement in which the rent increases every period for a fixed amount of time or for the life of the lease. Replacement Reserves: Monthly deposits that a lender may require a borrower to a reserve in an account, along with principal and interest payments for future capital improvements of major building systems; i.e., HVAC, parking lot, carpets, roof, etc. Reserve Funds: A portion of the bond proceeds that are retained to cover losses on the mortgage pool. A form of credit enhancement (also referred to as "reserve accounts"). Residual Income: The amount of money left over after you have paid all of your ordinary and necessary debts including the mortgage. This calculation is typically used with VA loans. Sale / Lease Back: When a lenders buys a property and leases it back to the seller for an extended period of time. Savings & Loans: A federally or state charted financial institution that takes deposits from individuals, funds mortgages, and pays dividends. Second Mortgage: A mortgage on real estate, which has already been pledged as collateral for an earlier mortgage. The second mortgage carries rights, which are subordinate to those of the first.
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