Some adjustable rate mortgages allow the interest rate to fluctuate independently of a required minimum payment. If a borrower makes the minimum payment it may not cover all of the interest that would normally be due at the current interest rate. In essence, the borrower is deferring the interest payment, which is why this is called “deferred interest.” The deferred interest is added to the balance of the loan and the loan balance grows larger instead of smaller, which is called negative amortization.
The process of bargaining that precedes an agreement.
Net Cash Flow
Investment property that generates income after expenses such as principal, interest, taxes and insurance are subtracted
Net Operating Income (NOI)
From income producing property, the gross income minus the total of all expenses except for debt service. Cash flow is defined as NOI minus the total of all debt service payments.
No Cash-Out Refinance
The amount of the new mortgage covers the remaining balance of the first loan, closing costs, any liens and cash no more than 1 percent of the principal on the new loan.
No Income Verification Loan (NIV)
A type of loan generally limited to the self-employed that is underwritten based on the borrower’s written representation of their annual income as stated on the loan application. No tax returns, operating statements or other verification of the income is required. Debt ratios are computed based on the stated income. The primary intent of these programs is to allow owners of small businesses to use their actual cash flows rather than the net incomes normally reported in tax filings. Higher interest rates on these products compensate lenders for their higher risks. (See definition of “debt ratio” above.)
A loan provision that prohibits the transfer of a mortgage to another borrower without lender approval.
A loan not meeting the underwriting requirements of Fannie Mae and Freddie Mac. I.e., the vast majority of loans.
Non-Disclosure Non-Compete (NDNC)
Common term used in commercial and multi-unit property listings. Sellers can require you to sign a NDNC prior to showing the property financials or scheduling an on-site visit.
Buyer is not required to qualify through traditional bank financing requirements
Non-Recurring Closing Costs
Costs that are one-time only fees for such items as an appraisal, loan points, credit report, title insurance and a home inspection
A written promise to repay a certain sum of money on specified terms.
An individual who acts as an intermediary between a holder of an existing note and a prospective purchaser of the note.
Notice of Default
A lender’s initial action when a mortgage payment is late and attempts to reconcile the issue out of court have failed.
Notice to Quit
Form to start the eviction process in Pennsylvania. Most states have such a form, but may be know by a different name. The form is issued to the tenant when they fail to pay rent. This gives them a warning that if they do not pay in 10 days that you will be filing to evict with the local jurisdiction.