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Mortgage / Loan Terms

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

I

Impound Account

Account held by a lender for payment of taxes, insurance, or other periodic debts against real property. The mortgagor or trustor pays a portion of, for example, the yearly taxes, with each monthly payment. The lender pays the tax bill from the accumulated funds.

Improvements

Generally, buildings, but may include any permanent structure or other development, such as a street, utilities. etc.

Inchoate Instrument

An unrecorded instrument (such as a deed) which is valid only between the parties and those having actual notice: but not against "the world" as it would be after recording.

Income Averaging

A method of figuring income tax by paying tax on the average income per year for the past five years. For example: A, a real estate salesperson, earns $10,000 taxable income for 4 years. In the fifth year, A sells a shopping center and earns $100,000 taxable income. A-could take the total income for 5 years ($140,000), divide by 5 ($28,000), and pay tax on $28,000 for the past 5 years, less what A has already paid.

Increasing And Diminishing Returns

An economic theory that an increase in capital or manpower will not increase production proportionately (five workers may do less than five times the work of one worker; and two workers may do more than twice the work of one worker). When the increase in production is proportionately greater than the addition, there is an increasing return, when production is proportionately less than the addition. the return diminishes.

Industrial Tax Exemption

An exemption from local property taxes granted to encourage industries to come into an area. Has been used successfully in the South. Usually granted for a definite period.

Inheritance Tax

A tax on the transfer of property from a deceased person: based on the right to acquire the property rather than the property itself.

Installment Contract

A method of purchasing by installment (usually monthly) payments. When referring to real property, it is usually called a land contract.

Institutional Lenders

Banks, savings and loan associations and other businesses which make loans to the public in the ordinary course of business, rather than individuals, or companies which may make loans to employees.

Insured Mortgage

A mortgage insured against loss to the mortgagee in the event of default and a failure of the mortgaged property to satisfy the balance owing plus costs of foreclosure. May be insured by F.H.A., V.A., or by private mortgage insurance companies.

Interest Cap

The maximum interest rate increase of an Adjustable Mortgage Loan. For example: a 120% loan with a 5% interest rate cap would have maximum interest for the life of the loan, which would not exceed 17%.

Interpleader

A court action, which may be filed in an existing case to be the initial action. One holding funds, which are in dispute, but not having an interest in the funds, would file an inter- pleader. For example: An escrow agent is holding a deposit of a buyer which funds both buyer and seller claim to be entitled. Escrow is willing to give the funds to either buyer or seller but does not want to be liable for giving the funds to the wrong party. The interpleader filed by the escrow agent asks the court to determine to whom the funds should be awarded.

Interstate Land Sales

Sales of land to a buyer in another state. Because the buyer is usually totally dependent on the seller for information regarding the property, federal disclosure laws have been passed to aid the buyer. The buyer also has a period (now 3 days) after singing a purchase agreement, in which to rescind. The laws were passed because of the large promotional land sales of the 50's and early 60's, some of which sold worthless desert and swamp land.

Involuntary Conversion

Conversion of real property to personal property (money) without the voluntary act of the owner. This occurs when property is taken by eminent domain (condemnation). The owner is allowed to convert back to real property (buy another property) without paying tax on the gain from the condemnation. This must be done within a set time (3 years) and the prices of the old and new property are considered to form a new tax base.

IRA (individual Retirement Account)

Savings programs available to individuals. The plans allow for a certain amount to be deposited each year. This money is not subject to income tax for that year or following years as long as it is not withdrawn. The money is taxed as withdrawn upon retirement, usually when the depositor is in a lower tax bracket. During the life of the account, the money may be put into various interest bearing investments. Securities dealers as well as banking institutions now offer IRA'S.

J

Jetty

(1) A pier or other structure (usually of stones), built out into a body of water to hinder the currents and so protect a harbor. (2) A part of a building which projects out beyond the exterior walls, such as an overhanging second story, a balcony, etc.

Joint Appraisal

An appraisal by more than one appraiser, but one, which states common conclusions of all.

Joint Tenancy

An undivided interest in property, taken by two or more joint tenants. The interests must be equal, accruing under the same conveyance, and beginning at the same time. Upon the death of a joint tenant, the interest passes to the surviving joint tenants, rather than to the heirs of the deceased.

Judgment

The decision of a court of law. Money judgments, when recorded, become a lien on real property of the defendant.

Judgment Lien

A lien against the property of a judgment debtor. An involuntary lien.

Judgment Proof

One against whom a judgment creditor cannot collect (no assets). If one can show he was defrauded by a "judgment proof" real estate licensee, he may recover from the state fund in states having such a fund,

Jumbo VA Loan

A loan for an amount greater than the allowable100% financed amount. It is determined by subtracting the maximum allowable 100% financed amount from the purchase price and financing 75% of the difference. Example: maximum allowable VA Loan-$110,000. Sale price-$130.000. Difference $20,000: 75% of the difference is $15,000. Total jumbo loan-$110,000 plus $15.000 = $125,000. Required down payment-$5,000.

Just Compensation

In condemnation the amount paid to the property owner. The theory is that in order to be "just," the property owner should be no richer or poorer than before the taking.

K

Keogh Plan

A retirement plan whereby a self-employed person may set aside a certain portion of income (tax deferred) into a retirement account. The money is taxable upon withdrawal at retirement when the person's tax bracket is often lower.

 
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