Glossary of Terms: B

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Balloon Mortgage:
A mortgage which involves periodic payments on the principal and interest that do not fully amortize the loan. The balance of the mortgage is to be paid in a lump sum at a specified date, usually at the end of the term.

Bankrupt:
A corporation, individual or firm who is relieved of their debts through a court proceeding. There are several chapters in which bankruptcy may be declared: Chapter 7 covers the liquidation of individual or business assets; Chapter 11 covers the reorganization of bankrupt businesses; Chapter 12 covers certain farm bankruptcies; Chapter 13 covers workouts of debts by individuals.

Borrower:
One who receives funds in the form of a loan with the obligation to repay the loan in full with interest. Also referred to as mortgagor.

Bridge Loan:
A short-term loan or mortgage that is collateralized by the borrower’s present home in such a way that allows the proceeds to be used for the closing of the new house. Usually there is a contract of sale that is needed on the present home.

Broker:
An individual who helps arrange funding or negotiating contracts between two parties but who does not lend the money himself or herself.

Buy-down:
Prepayment or subsidization made by the lender or homebuilder on the mortgage which in turn reduces the monthly payments on a loan either in an initial period of time or for the entire term of loan. The borrower may also “buy-down” the interest rate on a mortgage by paying discount points up front.