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Anchorage, AK 99518

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Invest In Mortgages


GLOSSARY

Because there are many terms that are unique to real estate and Mortgages, the following definitions may be useful.

A

Abstract of Title - A written history of the transactions or conditions bearing on the title to a designated parcel of land. It covers the period from the original source of title to the present and summarizes all documents of public record. (Not used in Alaska)

Acceleration Clause - A clause requiring the Buyer to pay the entire principal balance due if certain conditions of the Note are violated. A few examples of these conditions are: failure to make regular installment payments, non-payment of property taxes, and non-payment of hazard insurance premiums.

Accrued Interest - Interest that has been earned but not paid.

Add-Back Escrow - In a Note that utilizes an Add-Back escrow, the Buyer includes an extra amount with each month's payment in order to cover future tax and/or insurance bills payable by the Buyer. The Seller then pays property taxes and/or insurance premiums and adds back the amounts paid to the current principal balance owed.

Addendum -An addition to a written document. Addenda is the plural.

Agent - One who undertakes to transact business or to manage affairs for another, with the authority of the latter.

Amendment - An alteration to a contract.

Amortization - The length of time that it will take to pay off a debt at the mutually agreed upon interest rate and payment amount. An example of an amortization schedule for a $23,000 balance with payments of $250 at 11% interest is shown below:

Payment #

Total
Payment

Interest

Principal

Balance

0

-

-

-

$23,000.00

1

$250.00

$210.83

$39.17

22,960.83

2

250.00

210.47

39.53

22,921.30

3

250.00

210.11

39.89

22,881.41

4

250.00

209.75

40.25

22,841.16

Appurtenance - Something that is outside the property itself but is considered a part of the property and adds to its greater enjoyment such as the right to cross another's land.

Assessments - The amount of tax or special payment due to a municipality or association.

Assignee - The person or corporation to whom an agreement or contract is assigned; one to whom real property or an interest in real property is transferred or set over.

Assignment - A transfer from one party to another.

Assignor - A party who assigns or transfers an agreement or contract to another.

B

Balance Due - The amount currently owed on a debt; the principal balance due.

Balloon - The final payment on a mortgage, deed of trust or real estate contract when that payment is greater than the preceding installment payments and/or pays the loan in full.

Bankruptcy - The financial inability to pay one's debts when due. The debtor seeks relief through court action that may work out or erase debts.

Breach of Contract - A violation of the terms of a legal agreement.

C

Certificate of Title - A written statement furnished by an abstract or title company or an attorney stating that the title to a piece of property is legally vested in the present owner. (Not commonly used in Alaska.)

Certification - The act of showing evidence of ownership or debt.

Chain of Title - The history of all the documents transferring title to a parcel of real estate, starting with the earliest existing document and ending with the most recent.

Clear Title - Title not encumbered or burdened with defect such as mortgages, unpaid taxes, or underlying liens.

Cloud on Title - Any condition revealed by a title search that adversely affects the title to a property. Usually cloud on title cannot be removed except by a quit claim deed, release, or court action.

Collateral - Property pledged as security for a debt.

Commit Waste - To neglect property or allow it to be used in a way that lessens its value.

Consideration - A legal right or promise exchanged for the act, promise, or property of another person. For example, in a contract for the purchase of a piece of property, the property itself and the money paid (or promised to be paid) are the considerations made by the property seller and the new property owner, respectively.

Convey - To deed or transfer title to another

Conveyance - The document, such as deed, lease, or mortgage, used to effect a transfer of property.

Convenant - A legally enforceable promise or restriction in a contract. For example, a Buyer on a mortgage, deed of trust or real estate contract may covenant to keep the property in good repair and adequately insured against fire and other casualties. The breach of a covenant usually creates a default and can be the basis for foreclosure.

D

Deed - A written document that conveys or transfers title from one party to another. There are various types of deeds; however, the two most commonly used are warranty and quit claim.

Deed of Trust - An instrument used in many states (including Alaska) in place of a mortgage. Legal title to the property is vested in one or more trustees to secure the repayment of the loan.

Default - A failure to perform on one or more of the terms of a note or of the covenants of a mortgage, deed of trust or real estate contract.

Delinquent Payment - A payment that is not paid on a specified payment date. For example, if a payment is due on the first day of every month and it is not received until the fifth day of the month, then that payment is delinquent. If a mortgage, deed of trust, or real estate contract has a 10 day grace period, then a payment would not be considered "delinquent" until the eleventh day after the due date.

Devise - A gift of real estate by a will or last testament.

Dispossess - To obtain physical possession of property from another by due process of law.

Dower - Under common law, the legal right of a wife or child to a part of a deceased husband's or father's estate, regardless of the provisions in his will.

Down Payment - The amount of money paid at the execution of a mortgage or deed of trust. This lump sum of money is subtracted directly from the original sales price. The remaining principal balance then begins to accrue interest at the specified interest rate.

Due On Sale Clause - A clause set forth in some mortgages and deeds of trust whereby the Lender or Seller has the right to "call in" the balance upon the sale or transfer of the property by the Buyer or Purchaser to a third party.

E

Earnest Money - A deposit made by a Purchaser to demonstrate good faith; a down payment.

Easement - A right created by grant, reservation, agreement, pre-scription, or necessary implication, which one has in the land of another. For example, the right of public utility companies to lay their lines across other's property is a utility easement.

Encumbrance - Any right to or interest in land that effects its value including outstanding loans, unpaid taxes, easements, or deed restriction; a cloud on title.

Equity - The difference between fair market value and current indebtedness (balance due). For example, if a person owes $50,000 on his home and the market value is now $100,000 and he now has 50% equity in his home ($50,000 out of $100,000).

Escrow - An agreement between two or more parties providing that certain instruments or property be placed with a third party for safekeeping, pending the fulfillment or performance of a specified act or condition.

Escrow Account - An account in which a prescribed amount of money is deposited each time a payment is collected to be used for purposes provided in the escrow agreement. The most common is the collection escrow to administer payments made by a Buyer to a Seller.

F

Fee Simple - The highest and best form of ownership recognized by law. Owner is entitled to the entire property with unconditional power to sell it.

First Mortgage or First Deed of Trust - A real estate loan that creates a primary lien against real property. (Must be recorded prior to a Second or Third).

Fixtures - Improvements or personal property so attached to the land as to become part of the real estate. For example, a porch would be considered a fixture, whereas a ceiling fan may just be personal property.

Foreclosure - A termination of all rights of a mortgagor or Trustor in the property covered by a Mortgage or Deed of Trust. Statutory foreclosure is effected without recourse to courts but must conform to applicable laws.

Free and Clear Title - Title to a property without encumbrances. It is generally used to refer to a property free of debt.

G

Grace Period - The period during which one party may fail to perform without being considered in default.

Grantee - The person to whom an interest in properties conveyed. For example, in a real estate sale the Grantee is most often referred to as the Buyer.

Grantor - The person conveying an interest in property. For example, in a real estate sale the Grantor is most often referred to as the Seller.

Guaranty - A written promise by one party to pay a debt or perform an obligation contracted by another in the event that the original obligor fails to pay or perform as contracted. For example, a parent may guarantee payments owed by a son or daughter.

H

Hazard Insurance - A type of insurance bought to insure property against any losses due to fire, theft, vandalism, etc. Most Deeds of Trust require the Buyer to carry hazard insurance at all times in order to protect the Seller from insurable losses.

Heir - One who inherits property.

Hereditaments - Any property, whether real or personal, tangible or intangible, that may be inherited.

Homeowner's Policy - An insurance policy designed especially for homeowners. Usually protects an owner for losses by common disasters, theft, etc.

I

Improvements - Those additions to undeveloped land such as buildings, streets, sewers, etc., that tend to increase its value.

Installments - Parts of the same debt, payable at successive periods as agreed; payments made to reduce a Note.

Insurance Premium - The amount paid for the purchase of insurance.

Interest Rate - The percentage of money charged for its use. For example, a Seller may charge a Buyer 10% interest on the unpaid balance of a Note.

J

Judgment - A decree of a court stating that one individual is indebted to another for a certain fixed amount.

Judgment Lien - A lien upon the property of a debtor resulting for the decree of a court.

Judicial Foreclosure - Having a defaulted debtor's property sold at a price the court approves. This can result in a deficiency judgment against the Payor if the property value is less than the debt.

L

Late Charge - An additional fee charged to person for a payment that is delinquent. The most common methods of charging late fees are to charge a fixed dollar amount or a percentage of the payment.

Lease - A contract in which, for a payment called rent, the one entitled to the possession of real property transfers those rights to another for a specified period.

Legal Description - A property description recognized by law which is sufficient to locate and identify the property. A typical legal description will identify the recording district where the land is located.

Legatee - One who receives property by a will.

Lessee - One who receives property by a lease.

Lessor - One who leases property to a lessee.

Liability - A debt or financial obligation.

Liable - Responsible or obligated. For example, one who borrows on a Note generally becomes personally liable for its repayment.

Lien - A charge against property making it security for the payment of a debt, judgment, mortgage, or taxes. A lien is a type of encumbrance. A specified lien is against certain property only. A general lien is against all of the property owned by the debtor.

M

Maturity - The date on which an instrument of indebtedness, such as a Note, become due and payable.

Mortgage - A pledge of real property as security for the payment of a debt. With a mortgage, the Borrower retains possession and use of the property. A mortgage is typically signed simultaneously with a note.

Mortgagee - The party lending the money and receiving the mortgage.

Mortgagor - The party borrowing money secured by real estate and giving a mortgage.

N

Notary Public - One who is authorized by the state or federal government to administer oaths and attest to the authenticity of signatures.

Notice of Default - A letter sent to a defaulting party as a reminder of the default. Such a notice may state a grace period and the penalties for failing to cure the default.

O

Opinion of Title - A certificate, generally from an attorney, as to the validity of the title of property being sold.

Outstanding Balance - The amount currently owed on a debt.

P

Parcel - A piece of property under one ownership; a lot in a subdivision.

Parcel Number - A number given to a piece of property by the borough for tax purposes.

Payment - An agreed upon dollar amount paid in regular installments by a Buyer. The most common installment method for Notes is monthly payments, but can be quarterly, semi-annual, annual or any mutually agreeable schedule.

Personal Property - Any property that is not real property. For example, the following are personal property: appliances, cash, securities, Notes, furniture, and mobile homes not permanently affixed to a site.

Plat - A plan or map of a specific land area.

Plat Book - A public record containing maps of land and showing the division of the land into streets, blocks, and lots and indicating the measurements of the individual parcels.

Power of Attorney - An instrument authorizing a person to act as the agent of the person granting it.

Premises - Land; an estate; the subject matter of a conveyance.

Principal - The original amount of the total due on a Note; the principal portion of a payment is that portion which is not interest. (See "Amortization" for an example of a payment having both principal and interest portions.)

Principal Balance - The unpaid balance owed on a Note.

Principal and Interest Payment - A periodic payment, usually paid monthly, that includes the interest charges for the period plus an amount applied to the amortization of the principal balance.

Purchase Money Mortgage or Deed of Trust - A mortgage or deed of trust given by the Buyer of real property to the Seller as part of the consideration in the sales transaction.

Q

Quit Claim Deed - A deed that transfers only such interest, title, or right as a Grantor may have at the time the conveyance is executed; a deed without representations or warranties as to the nature of the rights conveyed.

R

Real Estate - Land and everything attached to it. Real Property.

Representations - Descriptions as to the quality or character of something. For example, a building may be represented as being free from structural defects.

S

Sales Price - The mutually agreed upon dollar amount to be paid for a particular piece of property.

Section - One square mile in a government rectangular survey. There are 36 sections in a six mile square township.

Security - Something given as a pledge for payment.

Seller - Individual who has sold real estate; also referred to as Vendor.

Subordinate - One who moves to a lower priority, as a lien would if it changes from a First Mortgage to a Second Mortgage.

Successor - One that receives title to property.

T

Tenements - Possessions that are permanent and fixed; structures attached to land.

Term - The amount of time (usually computed in months) until the balance of a Note is due and payable. For example, a Note may fully amortize over a 10 year period (120 months). However, the Note may also call for a balloon payment to be made at the end of the fifth year (60th month). In this case, the term of the Note would be 60 months or five years.

Title - Evidence that the owner of the land is in lawful possession thereof.

Title Insurance - A form of insurance purchased to protect against any losses or defects in the title of a particular piece of property.

Title Search - An examination of public records, law, and court decisions to disclose the past and current facts regarding ownership of real estate.

Township - A six mile square tract delineated by a government rectangular survey.

Trust Deed - A claim against real estate similar to a mortgage but title is held by a third party called a Trustee for the Beneficiary. (Same as a Deed of Trust)

Trustee - One who holds property in trust for another to secure performance of an obligation. (In Alaska this is usually a title company.)

U

Underlying Debt - An original loan that is still in existence. This loan may be owed on a mortgage, deed of trust, or real estate contract.

Use Restrictions - A clause in a deed which places limitations or restrictions on the property's use. For example, "this property can never be used to sell liquor" or "this property can never be used to raise farm animals". These limitations "run with the land" and are therefore binding on the subsequent owners.

W

Warranties - Promises contained in a contact. For example, a Seller may warrant that a property sold is structurally sound.

Warranty Deed - A deed that conveys or transfers title from one party to another with covenants assuring that the title transferred is free from all encumbrances.

Y

Yield - The rate of return on an investment. For example, if one invests $100 and receives $15 after the first year, one's yield is 15% on the invested cash for the first year.

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