Green Note:  A note that is created in the sale of property for the specific purpose of immediate resale to a prearranged investor.  In this case it might be construed to be a direct loan of money from the investor to the property Seller, and therefore subject to usury and truth in lending laws.  See also Usury and Truth in Lending.

Hard Money:  New money loaned against a property without a change in ownership.  Example:  A property owner puts a new second loan on the property to get cash.  This is a hard money loan.  Hard money loans generally involve personal liability in addition to the lien on the property.  See also Purchase Money.

Hard Paper:  Paper that has good strong terms and commands a good resale value in the paper marketplace.  It would sell for a relatively small discount.

Holder:  The current owner of a note.

Hypothecation:  Pledging assets for a loan.  In the case of a real estate loan, the property is pledged or hypothecated as security for the loan.  When you borrow against a note you own, you assign the note to the lender as security for the money you are borrowing.  The income from the note you assigned pays the payments on the money you borrowed. When the lender is paid in full, the note is assigned back to you.

I:  The interest rate or yield on a note.

Imputed Interest:  In seller carry-back financing, when the interest is below a certain rate determined by the IRS, the IRS imputes or charges the property seller tax on the highest rate of interest.  (See your tax advisor on this). 

Imputed Principal:  In seller carry-back financing, when the buyer of the property gets an interest rate below a certain rate specified by the IRS, the IRS may impute or declare that the actual property sales price was lower than stated in the purchase contract.  (See your tax advisor on this).

Installment:  One of a series of payments on a note.

Installment Note:  A note that is payable in several individual payments called installments.

Instrument:  The legal document used as evidence of debt, title, lien, etc.

Interest:  “Rent” paid on a debt.  See also Add-On Interest, Compound Interest, and Simple Interest.

Interest Extra:  The loan payment terms wherein the payment goes to principal and not to interest.

Interest Included:    The loan payment terms wherein the payment goes to interest first and any surplus goes to reducing the principal.

Interest Only:  The loan payment terms wherein the payment is exactly equal to the monthly interst, not more and not less.

Internal Rate of Return (IRR):  The yield or rate of return, used when working with a series of uneven cash flows; as contrasted to regular uniform payments.

Junior:  Recorded at a later date (than the senior loans).  The security instrument recorded next after the first loan would be a second.  It is junior to the first.

K Factor:  The Loan Constant.  See Constant.

Land Contract:  A security instrument wherein the seller (Vendor) gives the buyer (Vendee) possession of the property, but retains legal title (the deed) as security for a loan until specific payment has been made.  The  buyer of the property gets “equitable title” and the right to use and enjoy the property and tax benefits prior to actually receiving the deed.

Late Charges:  Fees or penalties owed to a lender when payments are late.

Less Than Interest Only:  The loan payment terms wherein the payments are less than the monthly interest.  This means the total debt grows with time.  See Negative Amortization.

Level Payments:  The loan payment terms wherein payments stay the same each period, neither increasing nor decreasing with time.

Leverage:  Buying property with other People’s Money (OPM).  This allows one to acquire much more property by putting as little down payment on each piece as possible.  High leverage means low equity.

Liabilities:  Debts and obligations owed on.

Lien:  An encumbrance or charge recorded against a property.  Recorded loans are liens.

Line of Credit:  A prearranged loan from a lender wherein when you want the money, all you have to do is write a check.  The check is deposited with the lender and becomes a loan at that time.  Instant loan!

Liquidate:  Go out of title, or turn into cash.

Loan:  The granting of the use of money or equity in return for payment.  The loan includes the right of one party to collect from another according to the loan agreement or note.  There are existing loans (already there) and new loans (ones just being created).

Loan Constant:  See Constant.

Loan to Value Ratio (LTV):  The measure of the security of a given loan.  It is calculated by taking the amount of the loan and any senior loans and dividing that by the property value.  The standard “safe” ratio is 80%.

Loan Value:  The maximum of loans that most lenders would lend on a property.  Assuming an 80% loan to value ratio, the Loan Value on a $100,000 property would be $80,000.

Long-Term:  In private party carry-back notes, long-term depends on the viewpoint of the parties, but generally, long-term would be over 3 years for discount paper.