Margin Of Security
Buffer amount between the value of the collateral and the principal balance of the obligation. For example, if the mortgage has a principal balance of $200,000 and the appraised value of the property is $250,000, the bank has a margin of security of $50,000 in the event of default. The greater the collateral value, the more protection the bank has. In troubled real estate markets because of adverse economic conditions, the market value of the property may fall substantially below the balance of the mortgage. Many homeowners in such a case have defaulted on the loan because of the decline in market values. For example, if the appraised value of a home has fallen to $60,000 while the mortgage balance is $100,000, it might be more financially prudent for the debtor to default on the mortgage.
Popular Real Estate Terms
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In everyday discourse, a merger defines the combination of two entities, be it real estate or two companies, into a single and legit one. We should make a difference between a merger and ...
Income for investors arising from net long-term profits of a real estate mutual fund realized when the portfolio is sold at a gain. Fund managers pass on profits from sales of real estate ...
A cost of funds index that most adjustable rate mortgages written in California in recent years are tied to. Computed by the Federal Home Loan Bank of San Francisco, it reflects the cost ...
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Subsoil that is beneath the A horizon and above the C horizon of the earth. ...
Acquired by adverse land use for a statutory period of time. ...
Group of people residing in one home, usually consisting of a family. ...
Net operating income (NOI) of property relative to its market value. If rental income property worth $1,000,000 results in NOI of $100,000, the overall return is 10%. NOI compared to ...
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