Mortgage Glossary - B
Definitions of Mortgage Terms
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- Back-to-back escrow - A closing that is set up so that one party can finalize the purchase of one property and the sale of another at the same time.
- Ballon Mortgage - Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract.
- Balloon payment - A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All ARMs are tied to indexes
- Basis Point - One one-hundredth of a percentage point. The difference between 8.04 percent and 8.05 percent is one basis point.
- Bi-weekly Mortgage - A mortgage in which you make payments every two weeks instead of once a month. The basic result is that instead of making twelve monthly payments during the year, you make thirteen. The extra payment reduces the principal, substantially reducing the time it takes to pay off a thirty year mortgage.
- Breach of Contract - Failure to abide by terms of a legal agreement without a legal excuse.
- Break even Point - The point at which expenses meet income or savings. In home finance, the break-even point often refers to the time it takes to recoup the costs of refinancing a loan or paying discount points.
- Building Code - Regulations that govern design and materials used in construction.
- Buy Down Mortgage - Usually refers to a fixed rate mortgage where the interest rate is "bought down" for a temporary period, usually one to three years. After that time and for the remainder of the term, the borrower's payment is calculated at the note rate. In order to buy down the initial rate for the temporary payment, a lump sum is paid and held in an account used to supplement the borrower's monthly payment. These funds usually come from the seller (or some other source) as a financial incentive to induce someone to buy their property. A "lender funded buydown" is when the lender pays the initial lump sum. They can accomplish this because the note rate on the loan (after the buydown adjustments) will be higher than the current market rate. One reason for doing this is because the borrower may get to "qualify" at the start rate and can qualify for a higher loan amount. Another reason is that a borrower may expect his earnings to go up substantially in the near future, but wants a lower payment right now.