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Term Definition
Gross Operating Income
Gross Scheduled Income minus Vacancy allowance.

Gross Rent Multiplier
Sales price of a property divided by the gross annual rental rate.

Gross Scheduled Income
Total annual rent value of all units in the property. This figure represents the total rent that the property would generate given 0% vacancy.

Ground Lease
A lease that rents only the land of a property.

Habendum Clause

"To have and to hold." The clause in a deed that defines the quantity of the estate granted.


Hard Money Loan

A loan underwritten with the value and condition of the property as the most important criteria for approval. Other issues may include the borrower’s credit, the ability of the borrower to repay the loan, and/or the ability of the borrower to either manage the property or successfully sell the property, making any necessary repairs. In a hard money loan, issues such as owner occupancy, debt ratios, etc are usually not considered. Appraisals rather than purchase prices are used to determine value.

Hard money loans often offer cash out purchases as a key benefit. These loans are usually approved within just a few days and funded very quickly as well—usually in less than two weeks. Disadvantages of this loan type include a relatively high interest rate (13-16%) and high points (usually 5 to 10). (See definition of "underwriting" below.)


Hazard Insurance

A requirement of loans in nearly all cases, hazard insurance provides compensation in the event of damage to or destruction of improvements.


Hereditaments
Property, personal and real, capable of being inherited.

Hiatus
A gap between two land parcels that the legal description does not include.

Highest and Best Use

the use of a parcel of land that is most likely to produce the greatest net return to the land or building over a given time period.


Holdover Tenant
A tenant who remains in possession of the leased property after the expiration of the lease term.

Home Equity Loan
A loan placed on an owner-occupied property when the loan-to-value after the Home Equity Loan closes is no higher than 100%. That is, it is a loan secured by the available equity of an owner -occupied residential property. This applies to virtually all loans.

Homeowner Association (HOA)
An organization consisting of the homeowners in a planned unit development, a subdivision, or condominium. The organization enforces deed restrictions and manages common elements of the development.

Homeowner's Insurance
See Hazard Insurance.

Homeowners Warranty
A special insurance policy covering some specific home repairs for a limited amount of time.

Homestead
A status provided to a homeowner's primary residence by certain state statutes to protect the home against judgments up to amounts specified in the statutes.

Homestead Exemption
A reduction in some jurisdictions in the assessed value that is allowed for a homeowner’s personal residence.

Housing and Urban Development (HUD)
A federal government agency that implements certain federal housing and programs encouraging community development.

Housing Code
An ordinance created by local government that sets specific, minimum standards of safety and sanitation for existing residential buildings.

Hypothecate
The act of pledging something as security without being required to give up possession of it.

Implied Warranty of Habitability
A legal doctrine that states that landlords must offer and maintain livable premises for their tenants. If a landlord does not provide habitable housing, tenants in most states may legally withhold rent or take other measures, including hiring someone to fix the problem or moving out.

Impound Account
See Escrow Account.

Improvements
Any additions to raw land, such as buildings, streets, sewers, etc. that will increase the property’s value.

Incidents of Ownership
Any control over property. If you give away property but keep an incident of ownership, then no gift has legally been made. For example, you may give away an apartment building but retain the right to receive rent form the property. This distinction can be important for those attempting to make large gifts to reduce your eventual estate tax.

Indemnify
To protect someone against damage or loss.

Index

The published cost of money that serves as the minimum basis to determine an adjustable rate mortgage’s interest rate. Indices such as the Prime Rate (Prime), the London Interbank Offering Rate (LIBOR), the Cost of Funds (COF) and the 1 year Treasury Bill (1 year T) are commonly used. The particular index is usually, but not always, selected based the frequency of adjustment to an interest rate. Loans that allow monthly interest rate adjustments often use the Prime Rate. Loans that adjust semi-annually may use LIBOR. The 1 year Treasury and the Cost of Funds are generally used for loans that adjust annually.

There are other Treasury instruments which can be used for 3 and 5 year adjustment periods. The loan’s interest rate is determined by adding a margin to the index. The size of the margin is generally a function of the index used and the credit worthiness of the borrower. Typical margins on a Prime Rate based loan are 0.0 to 5.0. As an example, if the Prime Rate is 8.25% and the margin is 2.0 (which is typical for an "average" borrower), the interest rate would be 10.25% (8.25 + 2.0).


Initial Note Rate
With regard to an adjustable rate mortgage, the note rate upon origination of the mortgage. This rate may be different from the fully indexed note rate.

Installment Contract
See Contract for Deed.

Installment Sale
The act of paying tax on the gain as the mortgage principal is collected. This occurs when a seller accepts a mortgage for part or all of the sale.

Insurance Binder
A document stating that temporary insurance is in effect. Since the coverage will expire by a certain date, a permanent policy must be obtained before the expiration date.

Insured Mortgage
A mortgage protected by either private mortgage insurance (PMI) or the Federal Housing Administration (FHA). If the borrower defaults on the loan, the insurer must pay the lender the loss incurred or the insured amount, whichever is less.

Inter Vivos
A Latin phrase meaning "during one's life."

Interest Accrual Rate
The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments.

Interest Rate
The percentage of the loan amount that is charged for borrowing money; the cost of the money in a percentage.

Interest Rate Buydown Plan
The seller, lender, or borrower pays an initial lump sum, which will entitle the borrower to a reduced monthly payment during the first few years of a home loan. A permanent buydown is paid in the same way, but it reduces the interest rate over the entire life of a home loan.

Interim Financing
A loan that is used when the property owner is unwilling or not able to arrange permanent financing.

Internal Rate of Return (IRR).
Also viewed as a discount rate at which the net present value of an investment is zero. This metric takes into account both the timing and the magnitude of future cashflows produced by the property

Intestate
A person has left no valid will.

Joint and Several Liability
Under this liability, a creditor may demand full repayment from any and all of the borrowing parties. Every borrower is liable for the full amount of the debt, not just the prorated share.

Joint Tenancy
Ownership of realty by two or more persons, who both have an undivided interest in the property.

Joint Venture
An agreement between two persons or more who are investing in a single property or business.

Judgment
A court decree that states that a certain individual is indebted to another. The judgment fixes the amount of the indebtedness.

Judgment Creditor
A person who has received a court decree or judgment for some sum of money that is due from a debtor.

Judgment Lien
A claim upon a debtor’s property that results from recording a judgment.

Judicial Foreclosure
A defaulted debtor's property is sold at a court-ratified price.

Jumbo Loan
A loan that is larger than the maximum amount allowed by conforming loans. The threshold amount has traditionally been adjusted on an annual basis, more or less, and has generally remained in the low $200,000's. The current threshold can be quoted by banks and mortgage bankers. Jumbo loans are typically available at interest rates slightly higher than those of conforming loans and usually require the same underwriting standards as conforming loans. (See definition of "conforming loan" above.)

Junior Mortgage
A mortgage whose claim against the property will be satisfied only after all prior mortgages on the property are repaid.

Kick back
A percentage of income given to a person in a position of power or influence as payment for having made the income possible: usually considered improper or unethical.

Kicker
A required additional payment in a mortgage other than normal principal and interest.

Land Contract

Acontract for the purchase and sale of land

A contract in which a purchaser of real estate, upon making an initial payment, agrees to pay the seller stipulated amounts at specified intervals until the total purchase price is paid, the seller retaining legal title to the land as security for the payments.


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