Balloon Mortgage / Balloon Loan

Mortgage that has regular monthly payments, but does not get paid in full by the end of a term. At the end of a term, balloon mortgage requires a large sum of money. For example, Ron has a $100.000 loan and his term is 5 years. He pays $1000 towards principal every month for 5 years. By the end of his term Ron would have paid off $60.000. With Balloon mortgage, Ron would be required to make a $40.000 balloon payment to return total amount owed or face foreclosure.

Balloon Payment

Payment at the end of a balloon mortgage term, that pays off remaining balance. For example, with balloon mortgage, if Ron had paid off $60.000 on a $100.000 loan, balloon payment would be $40.000. 

Backup Offer

Backup offer is the offer that the seller considers in the case that the first buyer fails to buy his property. Usually backup offer is not as good as the original one, but it meets criteria for the seller.

Bad Debts

Debt which cannot be collected by a creditor, after all attempts to collect it have been made. Bad debts can be written off as capital losses.

Back Title Letter

Letter that the insurance company passes to an attorney specifying ownership details on a piece of property. Attorney analyzes ownership details for insurance purposes.

Balance

Mortgage amount left to be paid. For example if you paid out $40.000 on a $100.000 loan, your balance is $60.000.

Balance Transfer

Transfer of unpaid credit card debt from one creditor to another. Credit card companies offer low rate, usually 0% to encourage transfer from competing companies and overly high penalties to discourage transfer of existing debtors.

Balance Transfer Fee

Fee charged by credit card companies for debt transfer. For example, Ron owes $1000 to Y company and wants to transfer to X company. He will be charged balance transfer fee by his Y company, before Y allows him to transfer to X.

Balance Sheet

Summary of all the assets, liabilities, and equity for a specific date. Balance sheet is one of the most important pieces of information produced in a company.

Bank Holding Company

Company controlling one or more financial institutions. For example, I may own YYY Bank. I may also branch out and offer insurance and credit cards under new names, making my YYY company, a bank holding company of the new institutions I opened.

Bank Letter of Credit

A document by the bank, which states that an individual can take up to a certain amount of debt from that bank. For example, a bank may give me letter of credit for $5000, meaning I am allowed to take out $5000 of credit from that bank.

Bank Spread / Spread

The difference between interest rate offered to a creditor and to a depositor. For example, if you want to get a credit card the interest will most likely be 15%-20%, but if you want to put savings under interest the accumulated rate will be around 5%-7%. The difference between the two is “Spread”.

Bank Rate

Rate at which central banks lend money to national banks.

Bank Wire / Wire Transfer

Electronic money transfer system between banks.

Bankruptcy

A state when a person or a company cannot repay debt. In the case of bankruptcy, creditors are first to gain money from liquidation of assets. 

Bankruptcy Trustee

Individual who is appointed by law to represent a person or a company in bankruptcy and to initiate bankruptcy proceedings on their behalf.

Back-end Ratio / Back Ratio

Ratio used by lenders to calculate total amount that an individual is eligible for.
Back-end Ratio represents percentage of the monthly income that goes towards paying off debt. The formula:  So if you earn $5000 per month and have mortgage and car payments totaling $2000, your back to end ratio will be: 2000/5000 * 100 = 40. Meaning that 40% of your income goes towards paying off debt.

Lenders usually do not give out loans that require the borrower to pay more than 36% of the income towards the mortgage.

Back-to-back Escrow / Back to back Escrow

Method which allows you to buy new property and sell off existing as soon as the purchase is made. Such an offer is not too attractive to sellers.

Base Price

Cost of a car without any add-ons or upgrades. Base may also refer to a new, not yet build house.

Base Loan Amount

Total amount of money borrowed, without interest. If additional charges occur, they are added to the base loan amount.

Basis / Cost Basis

Cost basis is used for calculating taxes on futures, stocks and other financial assets.

Bargain Sale

Sale of a property for less then the actual market value.

Basis Point / BPS

Basis point is a financial unit which equals to 1/100 of 1%. It is used for calculating changes in interest rates, yields and other monetary entities.

Before-tax Income / Before Tax income

Amount of income without tax.

Bedroom Community

A community located in the rural providing little work opportunity, but located near an employment center.

Bequest

Bequest is a gift of personal property. For example, I may give away my car to my friend and legally document it as a bequest.

Betterment

Improvement to a property like renovations, upgrades and additions.

Beneficiary

Person who will benefit from will, deed or trust. Beneficiary may be a spouse, child, relative or a friend. Beneficiary may receive property and assets as a result.

Bidding War

Competition between two or more buyers on a piece property, raising value of that property with each bid. For example, Ron is selling his house and has 3 bidders. Each bidder puts a higher bid on Ron’s property in the hopes of buying it. Ron stays happy since the price goes up.

Bill of Sale

Document that specifies and confirms transfer of rights to a piece of property.

Bill Presentment

Internet billing system that allows customers to see their financial details online. Most banks and financial institutions offer it. Bill presentment may also allow to pay bills online and make transfers via internet. It is a very convenient system, since people can manage finances from comforts of their rooms.

Bilateral Contract

Agreement between two parties, where everyone promises to give something to each other. For example, “I give you money, you give me your car” is a bilateral contract.

Billing Cycle

Time between periodic payments. For example, a billing cycle for a phone bill is usually one month.

Binder

An agreement on the purchase of a property, where purchaser deposits a certain amount of money to show his good faith. For example Ron is buying a house for $100.000 from Alex. To show Alex that he is serious, Ron signs an agreement and deposits $2000. 

Billing Statement

A document sent by a credit to the borrower detailing monthly account activity and balances.

Biweekly Mortgage / Bi-weekly Mortgage

Bi-weekly mortgages are designed to shorten mortgage life. With a biweekly mortgage, you pay half of your monthly payments every two weeks. The idea is the following.

There are 52 weeks in a 360 day year. Since biweekly mortgage is paid every two weeks, you will make 26 half payments in year. Twenty six weeks(26) equals to 13 months, meaning that with biweekly mortgage, you will make 13 months worth of payments in a calendar year.

This method allows reducing mortgage more quickly while paying less in interest.

Bimonthly Mortgage / Bi-monthly Mortgage

With bi-monthly plan you pay every half month, half of your monthly payment. One half on 1st, second half on 15th. It is said to shorted mortgage life, but this is not true.

Blanket Insurance / Blanket Insurance

An insurance that covers more then one property, but insured by one person.

Blanket Mortgage

A mortgage that covers more then one property, by signed to one individual.

Blank Cheque

A cheque that is signed, but has no money amount specified in it.

Blended Rate Mortgage / Blended Mortgage

Type of mortgage offered to borrowers who are looking to refinance.

Blended Rate Mortgage combines old interest rate with the new rates.

For example: Ron wants to refinance. His old rate is 6%. Current interest rate is 10%. In order to save Ron as an existing customer his lender offers 8% rate, which is higher then Ron’s previous rate, but lower then the current interest rates.

Blighted Area

Section of the city where majority of the structures are ruined.

Blemished borrower

A high risk borrower in the eyes of the creditor. This may be due to low down payment, low income / loan ratio, bad credit, no income proof and other factors.

Blueprint

A document which outlines a project. For example, before building a house, Ron must draw a blueprint with design, calculations etc.

Blue Sky Laws

Regulations that protect investors from investing in fake securities.

Blue-ribbon condition / Mint

Something in brand new condition.

Board Foot

A piece of wood that is 1 inch think, 1 foot long, 1 food wide. It is used for construction purposes.

Board of Equalization

Governmental organization that assesses property taxes.

Bona Fide

Characterizes good faith of either seller or buyer, with no desire to fraud.

Bond

Document which guarantees that government or corporation will pay back amount owed, plus interest, by specific date, to individual lenders.

For example: you as an individual want to lend money to a corporation. You can do so buy buying bonds. Bond are simply papers that guarantee that a corporation to which you lend money will pay back the amount, plus the interest. You become the lender and corporation becomes the borrower. Bond is a tool that makes this transaction possible.

Boilerplate

Document with preprinted sections. Good example is mortgage application or credit card application.

Book Value

The value of an asset minus depreciation.

For example: company X bought a building for $500.000 and intentionally depreciated it to $450.000 in the books. The $450.000 would be the book value.\

Booking Fee

Fee charged for booking products or services. 

Boot

Value on top of a deal in order to ensure that the exchange is equal.

For example: Ron buys a $100.000 house, but only has $85.000 cash. He can add his $15.000 dollar car on top of it to make sure value is equal (if seller accepts). The $15.000 car would be a boot.

Borrowing Entity Type

Company, government, individual or any other entity which borrows money.

Borrower / Mortgagor

Person or a company who borrows money.

Boundary

Indicator that divides two properties.

Bonus Income

Extra money made apart from main income.

For example: Ron bought 100 concert tickets and sold them double the price each, earning bonus income.

Breach

Breaking or violation of the law, contract, justice or an agreement.

Breach of Covenant

Failure or violation of the promise made in a contract. For example, Ron signed a contract stating he will make payments every month, but failed to keep that promise.

Breach of Contract

A violation of a legal contract between two parties, where one party refuses or no longer follows the contract. A non violating party is no longer binded by the contract and may proceed to legal actions against violating party.

For example: BBB company and YYY company had a contract which stated that BBB company will be supplying YYY company with merchandize for a year. BBB company decided not to abide by contract agreement and refused to supply YYY with merchandize, breaching the contract. In that case YYY may proceed to legal actions against BBB company for breach of contract.

Breach of Warranty

When seller cannot sell property to a particular buyer.

Break-even Point / Break Even Point

Point at which income is at the same level as persons expenses.

For example: Ron makes $5000 a month. Every month he pays $2500 for his house, $1000 for his car and $1500 in house bills. Total amount of expenses is $5000, same as his income, meaning that Ron has reached break-even point.

Bridge Financing / Bridge Loan / Short Term Loan / Swing loan

Is a high interest, short term loan, which finances new property, before the old one is sold.

Broom Clean

Property that is ready to be pained and renovated. Broom clean does not imply that property is clean, but rather means it is ready for more work on it.

Broker

Person who represents another person or another company.

For example: mortgage brokers represent borrowers or lenders. It is brokers job to find borrowers or lenders and satisfy whoever they represent.

Buffer Strip

Piece of land or construction that separates two properties.

Builder Upgrades

Upgrades that the builder of a house offers to buyers. For example – hardwood floors, extra driveway pavements etc.

Building Code

Regulations set by governments that specify minimum requirements for buildings. Construction firms are abided by law to follow building codes.

Building Inspector

An individual who enforces municipal building codes.

Building Moratorium

A halt of a construction project temporarily or permanently.

Building Permit

Permission from government to build on a specific piece of land.

Building Restrictions

Restrictions made by local governments that limit building projects. For example, in urban populated areas, government may not allow certain materials or certain colors.

Builder-financed construction

When builder finances construction project out of his own pocket, without borrowing.

Building SF

Shortcut for: “Square Feet”

Building Society

Financial institution that lends money for construction projects, mortgages and offers other related real estate financial services.

Buildings Survey

Survey that assesses condition of the property, estimates value, taxation and gathers other types of data about a building.

Built-ins

Machinery, cabinets and other inventory that is a part of the building and cannot be moved.

Bundle of rights

Your rights to the property.

Buy-up

Points paid by lender to a borrower or mortgage broker for a loan with an above-market interest rate. - Investopedia

It is known as a rebate that can reduce up front mortgage costs. Buy-up is useful for people who are planning on selling newly bought property in the near future.

For example: Ron bought a house for $100.000 and did a buy-up with his lender. Instead of regular 6%(at that time) interest rates, lender gave Ron 8%, while taking care of mortgage closing costs. It is beneficial to Ron since he plans on moving out soon and closing costs can add up to $4000.

By the time Ron moved out he only paid $2000 in higher interest rates instead of $4000 in closing costs

Burden of Proof

In a legal system, one must provide enough proof to win the case.

For example: if Ron accused John of fraud, Ron must show proof of fraud to the court to win the case. It is a legal requirement.

Business Bankruptcy

When a business cannot pay the debts and files bankruptcy.

Business Interest Expense

Interest paid by a company on the money borrowed for business expenses.

For example: Ron borrowed $50.000 for his business and paid back $50.000 plus $5.000 in interest. $5.000 would be his business interest expense.

Budget

Money allocated for certain goods, services, business plans, vacations, living etc.

For example: Alex wants to buy a house and has a total of $300.000 in his bank. He wants to buy a house, renovate it and move in, by only spending $300.000, meaning that this is his budget.

Budget Category

Fixed amount of money that will go towards a specific spending category.

For example: Alex has a budget of $300.000 to buy a house. He has budget categories:

House: $250.000
Renovations: $50.000
Total: $300.000

Buy-down / Buydown / Buy Down

There are two meanings:

1.Option that allows borrowers to reduce mortgage interest rates by paying an additional sum.

For example: I want to pay less interest. I can pay a sum of money (for example $5000) to the lender and my interest rates will be reduced for a number of upcoming years. That sum will be deposited in a special account and will help to gradually pay for the interest every month. In a long term context, buy downs reduce interest since you provide lenders with guaranteed stream of income for a limited time.

2 Conditions offered by lenders to promote a mortgage, or help builders sell property.

For example: A builder has a condominium complex that is not selling well. Builder may work out a buy down with lenders and offer lowered interest rates and other incentives to lure in buyers.

Buy-down Account / Buydown Account / Buy Down Account

Account where buy down is held.

Buyer Broker

Agent that represents the seller.

Buy to Let / Buy-to let Mortgage

Buying residential property and renting it to tenants.

For example: Ron gets a mortgage from a lender, buys an apartment complex with that mortgage and rents it to other people.

Buyer's market / Buyers market

When buyers have a wide variety of choices and demand or pick lower prices. Buyer’s market happens due to overbuilding, reduction in population and economic problems.

Buyer's remorse

A period when buyer can break a deal or return a product for any reason.

For example: Ron bought new furniture. He doesn’t feel right about it and brings it back within buyers remorse. Seller has to legally accept it and refund Ron’s money. Buyers remorse differs from province to province and may not apply to housing market.

Bylaws

Bylaws are set of rules within an organization(corporation) that everyone must follow. Government laws override bylaws.