Home Loan Glossary – B

B

Balance sheet

A balance sheet is a financial statement that reflects the assets, liabilities and net worth of an individual as of a specific date.

Balloon Loan

A balloon loan is a loan that features monthly payments calculated over a specified amortization period (e.g.: 30 years), but requires a lump sum payment of the full principal balance at the end of a shorter term (e.g.: 10 years). This results in more affordable monthly payments until the full balance is due.

Balloon Payment

A balloon payment is the final lump sum payment for a balloon loan, made at the end of the loan's shorter term. Balloon payments, typically, are made by refinancing the loan at the most attractive terms available at that time.

Bankrupt

A person, company or corporation that is financially incapable of paying their debts can be declared bankrupt—a step most consider a last resort after seeking other remedies, such as debt consolidation. A court will grant relief to the debtor, by arranging a payment schedule, or erasing some debt. In certain cases, the debtor is obliged to hand over control of all assets to a court-appointed trustee. Bankruptcy stays on consumer credit reports seven to ten years, making it harder and more costly to borrow in the future.

Bankruptcy

Bankruptcy is a federal court procedure that grants relief and arranges a debt payment schedule, or erases some debt, for someone who is financially unable to settle outstanding debts. Bankruptcy stays on consumer credit reports seven to ten years, making it harder and more costly to borrow in the future. Bankruptcy is considered a last resort.

Bill Of Sale

A bill of sale is a written document that transfers the ownership rights (or "title") to personal property from the seller to the buyer.

Biweekly Payment Loan

This type of loan requires that payments are made every two weeks, rather than only once per month, in order to speed up the repayment of the loan and save interest expense. The biweekly payment amount equals one-half of the monthly payment amount required if the home loan was a standard 30-year, fixed rate loan. These payments are usually deducted from the borrower's bank account. A biweekly payment home loan leads to significant interest savings due to faster principal repayment.

Bond

A bond is an interest-bearing certificate of debt that has a maturity date, when the amount owed to the bond-holder must be paid. It is an official obligation that may be secured by a deed of trust or a home mortgage.

Breach

A breach is the failure to meet the terms and conditions of any legal obligation or agreement.

Break-even Point

The break-even point is reached when a person's or business's total income is equal to their total expenses. The break-even point of a transaction is when its cost has been matched by the expected gains of that transaction.

Bridge Loan

A bridge loan is a type of short-term mortgage financing to free up cash between the termination of one loan and the activation of another. For example, a bridge loan may be secured by the borrower's present property, which is up for sale. The loan allows the expected sale proceeds to be used as down payment on a new home before the present home has been sold. This type of loan is also known as a "swing loan".

Broker

A real estate broker is a person licensed by the state to assist in the sale and purchase of real estate. A mortgage broker is a licensed professional who specializes in placing people into home mortgages offered by a variety of sources. Brokers' services are provided for a fee or a commission (Also see Mortgage Broker).

Budget

A budget is a detailed list of income and expenses expected during a specified period. Drawing up a budget can provide important information to assist in the management of future investments and expenses such as home loans.

Building Code

A building code spells out the local rules and regulations regarding requirements for the design and construction of homes and office buildings, as well as the materials that should be used to build them. Health and safety standards play an important role in determining building safety codes.

Buydown Account

This is an account that may be set up as part of a mortgage interest rate buydown plan. The buydown account is where cash is kept and used to supplement the monthly payment made by the borrower. This, however, only applies during the time that the buydown plan is in effect. If a seller, for example, agrees to assist the buyer in reducing monthly payments during the first year of the loan, the seller may put funds into a buydown account. Funds are then paid to the lender on a monthly basis to reduce the buyer's monthly payment. This is usually done through a buydown paid directly to the lender upon closing of a sale.

Buydown

A buydown is a payment made to temporarily or permanently reduce the interest rate and monthly payment of a home loan. With a temporary buydown, a borrower enjoys lower monthly payments during the first few years of a home loan. A permanent buydown reduces the interest rate and payments throughout the life of the loan. The buydown is generally paid in an initial lump sum by the seller, lender or borrower.