A preliminary agreement, secured by the payment of earnest money, between a buyer and seller as an offer to purchase Real Estate. A binder secures the right to purchase Real Estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money is forfeited unless the binder expressly provides that it is to be refunded.

Used to describe mortgage yield, one basis point equals one 100th of 1% or 0.01%. A mortgage yield increase from 9.50 to 9.75% is an increase of 25 basis points.

A proceeding in a federal court in which a debtor (who owes more than his/her assets or cash flow) is relieved from the payment of debts. This can affect the borrower’s personal liability or the mortgage debt but not the lien of a mortgage.

A mortgage that has level monthly payments which are insufficient to amortize the loan so that a balloon, or lump sum payment is due at the end of the term. Frequently, balloon mortgages contain an opportunity to refinance when the balloon payment is due.

An obligation undertaken by the purchaser of property to be personally liable for payment of an existing Mortgage. In an assumption, the purchaser is substituted for the original mortgagor in the mortgage instrument and the original mortgagor is to be released from further liability in the assumption, the mortgagee’s consent is usually required.

The original mortgagor should always obtain a written release from further liability if he/she desires to be fully released under the assumption. Failure to obtain such a release renders the original mortgagor liable if the person assuming the Mortgage fails to make the monthly payments.

An “Assumption of Mortgage” is often confused with “purchasing subject to a Mortgage .”
When one purchases subject to a mortgage, the purchaser agrees to make the monthly mortgage payments on an existing mortgage, but the original mortgagor remains personally liable if the purchaser fails to make the monthly payments. Since the original mortgagor remains liable in the event of default, the mortgagee’s consent is not required to a sale subject to a mortgage.

Both “Assumption of Mortgage” and “Purchasing Subject to a Mortgage” are used to finance the sale of property. They may also be used when a mortgagor is in financial difficulty and desires to sell the property to avoid foreclosure.

A means of transferring a contract right or other asset to another person or entity.

Charges levied against a property for tax purposes or to pay for municipality or association improvements such as curbs, sewers, or grounds maintenance.

The value that a taxing authority places on real or personal property for the purpose of taxation.

Ownership in real property which is to be specifically excluded from community property.

A property’s increase in value due to inflation or economic factors.