1st Mortgage

The senior lein on a property.

2nd Mortgage

A mortgage whose lien position is subordinated to the 1st mortgage on a property.


The gradual repayment of a mortgage in installments of principal and interest, with a part of each payment applied to principal and interest. As the loan ages, the amount of each payment going to interest decreases and the amount going to principal increases, resulting in the loan being paid off in a predetermined number of payments.


A written valuation of property based on a licensed appraiser's knowledge, experience and analysis of comparable sales of similar properties.


The transfer of ownership of a mortgage.

Balloon Mortgage

A mortgage that requires the remaining principal balance be paid off at a fixed point in the future, usually before an amortized loan has been fully amortized.  For example, a mortgage might be amortized for 30 years, and have a 5 year balloon.

Balloon Payment

A lump sum payment due and payable when the term of a balloon mortgage ends.

Blanket Loan

A loan that uses cross collateralization to cover two or more pieces of property.

Bridge Loan

An asset based loan collateralized by commercial real estate and intended to be used for a short period of time, normally up to three years, between the initial requirement for funding, and a future date when permanent long term financing can be secured.  A bridge loan requires a higher interest rate and more points that a conventional loan, and is more expensive than standard bank financing, because the lender has to assume more risk than with a conventional loan.  See Hard Money Loan.

Capitalization Rate

The ratio, expressed as a percentage, used to estimate the current value of commercial property, based on the estimated future net operating income divided by the sales price or value of the property.


A meeting where a real estate transaction is completed by signing documents and advancing funds.


Property that is pledged as security for the repayment of a loan.

Credit Tenant Financing

A form of real estate financing that uses a credit tenant lease to help a landlord borrow money to finance a commercial property, by pledging the rents to be received from the tenant as security for the loan. A credit tenant lease is structured as a sale/leaseback transaction, or as a new purchase transaction.  Credit tenant financing is usually structured as nonrecourse debt, and the lease is structured as a triple net lease.


The act of using two or more pieces of property as collateral under a blanket loan.

Deed of Trust

A three-party document that conveys interest in property to a trustee, who holds a deed in favor of the lender, and then reconveys title to the borrower when the loan is paid in full. 


A borrower's failure to make the required payments on a loan.

Due Diligence

The process of investigating property from a financial, legal and physical position.


An owner's financial interest in property, or the difference between the market value of property and the amount of the loans and leins held against it.


A legal agreement that is held in trust by a neutral third party, or trustee, and not put into effect until satisfaction of certain conditions have been fulfilled.

Federal Funds Rate

The overnight lending rate (interest rate) between banks as set by the United States Federal Reserve Bank


A legal process started by a lender at default, to deprive a borrower of his right to redeem a mortgage on property, and to deprive him of his interest in the property.


The person to whom an interest in property is conveyed.


The person who conveys an interest in property.

Hard Money Loan

A synonym for a bridge loan on commercial real estate.  A commercial asset based loan collateralized by a piece of property's hard value, or quick sale value, not its retail or appraised value.  A hard money loan is intended to be used for a short period of time, usually up to three years, until permanent financing can be arranged.  A hard money loan requires a higher interest rate and more points than a conventional loan, and is more expensive than standard bank financing, because the lender has to assume more risk than with a conventional loan.  See Bridge Loan.


A lien or claim attached to property.

Land Contract

A contractual arrangement under which a buyer purchases property from a seller over a period of time, without title to the property being conveyed to the buyer, until the final payment has been made.


London Interbank Offered Rate

Loan to Value

The ratio, expressed as a percentage, between the present balance of all mortgages on a property used as collateral for a loan, and the current market value of the property.

MAI Appraisal

An MAI appraisal is the most sought after kind of commercial real estate appraisal.  MAI stands for Member of the Appraisal Institute.  Technically, there is no such thing as an "MAI appraisal", just appraisals done by appraisers who have completed MAI classes and earned the MAI designation. 

Market Price

The selling price of property.

Market Value

The written estimated value of property based on an appraisal by a licensed appraiser.

Marketable Title

A title on property that is free from liens or claims.

Mezzanine Financing

A hybrid of debt and equity financing that is not a mortgage.  Financing using a loan which gives the lender the right to convert debt capital into an ownership, or equity interest, in a company if the loan is not paid back according to terms.


A two-party legal instrument that creates a lien on property, and pledges the subject property to a lender as security for the purpose of repaying a debt.





Owner Financing

The same as seller financing. A type of financing provided by the seller of property, who carries, or takes back a secured note, and provides financing for the buyer, instead of the buyer having to use traditional bank financing.

Prime Rate

The interest rate charged by banks to their most credit-worthy customers, which serves as a benchmark for most other loans in the country.


A capital sum.  The amount of a mortgage borrowed or remaining unpaid.

Principal  Balance

The outstanding balance of principal on a mortgage, less interest and other charges.


1% of the face amount of a loan.

Power of Attorney

A legal document that can be complete, or limited, which authorizes another person to act on one's behalf.

Quitclaim Deed

A deed that relinquishes and transfers a grantor's interest or title to property, without warranting such title at the time conveyance is made.


Real Estate Investment Trust


A legal document that gives evidence of a person's ownership rights to property.

Triple Net Lease

A net lease on commercial real estate structured so that the tenant pays a portion, if not all of the common operating expenses related to the property's ownership, in addition to the base rent.  The major operating expenses associated with ownership of a commercial property are referred to as the three nets, which are property taxesinsurance, and maintenance.


A person who holds or controls a property for the benefit of another.


The estimated value of property as estimated by a licensed appraiser.

Warranty Deed

A type of deed where the grantor guarantees that he holds clear title to a piece of property, and has a right to sell it to the grantee.