Loan: A verbal or written contract in which a borrower agrees to repay a specified sum of money given by a lender under specific terms and conditions (usually with interest). Promissory Note: A written promise to pay a specified sum of money to a designated person or entity. Lien: Security in a property. Lien-holder: The holder of interest in a property. Also called the lender. Unsecured Loan: A loan that is not secured by a lien. Deed of Trust: The transfer of interest in a property to a trustee who holds it as security for a loan between a trustor and a beneficiary. In Arizona, the majority of loans used to purchase property are trust deeds rather than mortgages. Trustor: The borrower in a deed of trust. Beneficiary: The lender in a deed of trust. Non-Judicial Foreclosure: In a deed of trust, if the borrower defaults on the loan, the trustee has the right to foreclose on and transfer title to the lender or sell the property to pay the lender from the proceeds. Because a court order is not required, this process is generally more expedient and less costly than judicial foreclosure. Mortgage: The transfer of an interest in property to a lender as a security for a loan. While a mortgage in itself is not a debt, it is the lender's security for a debt. Judicial Foreclosure: In a mortgage, if the borrower defaults on the loan, the lender has the right to sell the property under the supervision of a court. The proceeds of the sale are used to pay the balance of the loan. Because a court order is required, this process is generally more lengthly and expensive than non-judicial foreclosure. Deficiency Balance: The remaining loan balance after a property is sold through foreclosure. Equity: The monetary value of a property beyond what is owed on the loan(s) against it. Negative Equity: When the fair market value of a property is less than the outstanding balance of the loan(s) it secures. Commonly referred to as being "under water" or "upside down" on a house. Forearance: A postponement of loan payments, granted by a lender or creditor, for a temporary period of time. This is done to give the borrower time to make up for overdue payments. Principal Balance: The amount owed on a loan before interest and fees. Debt Forgiveness: When a lender agrees to accept less than the full balance of a loan for full satisfaction of the loan. Settlement: When a lender agrees to accept a fixed dollar amount from a borrower in exchange for forgiveness of the remaining debt. Purchase Money Loan: A loan that was used to purchase a property. Non-Purchase Money Loan: A loan that was not used to purchase a property such as home equity line of credit (HELOC) or a loan used to refinance an existing loan. Home Equity Line of Credit (HELOC): A line of credit (loan) that is secured by the equity in a property. |