Different and Types of Notes and Mortgages

Ballon Notes allow for payment for a period of time with a final lump-sum payment for the remaining of the term.

Blanket mortgage – covers several parcels of real estate. There will usually be a clause that allows the release of individual parcels upon the payment of an agreed amount of money. Builders often use these loans for the complete construction and sell the property with improvements. By permitting the lender to protect the loan with several parcels of real estate, the borrower obtains a larger loan on better terms.

Bridge Loan or Swing Loan – it is used between two loans such as between a construction loan and a permanent loan.

Budget loan – is one that monthly payments for property taxes and insurance.

Buy-down loan – has an interest rate that is before the market rate due to the payment of discount points at the time the loan was originated. A loan can be bought down for the entire term of the loan-a permanent buy-down- or for a shorter period such as the first one to five years of the loan – a temporary buy-down.

Chattel Mortgage – a mortgage on personal property (personal property is chattel)

Construction loan – allows partial funds to be advanced at certain stage of construction, with the final payment being made at the end of construction.

Fully Amortized mortgage – Payments pay the debt by the final payments due.

Growing Equity mortgage – A loan that is scheduled to pay out over a long period (such as 15-30 years), but because of increasing principal payments over the years the loan pays out earlier than scheduled.

Interim Financing – A temporary loan that is usually used during construction.

Non-recourse loan – The borrower has no liability for the loan, therefore, a deficiency judgement could never be executed against the borrower

Open -end mortgage – A mortgage that allows the borrower to obtain additional money, without additional security, up to an agreed upon limit, often used in construction loans.

Package mortgage – is a combination loan on real and personal property. This form of mortgage permits the buyer to borrow on the value of the land and buildings as well as on the value of the appliances and equipment installed on the property. The lender will include stoves, refrigerators and air conditioning equipment and the mortgage protecting the loan will attach to both real and personal property.

Partially amortized mortgage – Payments do not pay the entire debt by the final payment. A ballon payment is paid with the final payment.

Participation loan – When one or more lenders share in the ownership or financing of the property. This commonly occurs on the large projects when insurance companies are lending the funds.

Purchase money mortgage – A loan to finance the purchase of property.

Reverse annuity – Homeowners borrow money against their equity, which is paid in monthly payment. The mortgage balance increases with each payment. This is usually done for elderly persons as a means to keep their homes.

Reverse amortization or negative amortization loan – The lender shares in the ownership of the property. The commonly occurs on large projects when insurance companies are lending the funds.

Straight notes or Team Loan – Payments are for interest only, not principal. The principal is paid at the end of the term.

Subject-to-loan – The purchaser buys a property that is “subject” to an existing lien that is owed by another party (usually the seller). The property can be foreclosed upon if that other party does not pay the lien, and the buyer loses the property. The buyer is not responsible for the loan and cannot be held liable, in any case.

Take-out loan – Replaces a construction loan with a permanent mortgage (the lender is “taken out” of the construction loan).

Wrap-around mortgage – is a large second mortgage tthat includes (wrap-around) an existing first mortgage. The borrower makes the payment to the second lien lender. The property is often taken “subject to” payment of the first lien.