A cosigner is an individual who agrees to take on the financial obligations of a loan or debt if the primary borrower defaults. This person provides assurance to the lender of repayment.
A covenant is a legally-binding promise made in a deed that can be enforced as a contract. It often involves agreements or restrictions related to financial obligations or land use.
A cross-default clause in a loan agreement that stipulates that a default on one loan can trigger defaults on other loans held by the same borrower.
A demand note is a financial instrument that is payable immediately upon the lender's request or on a specified date of maturity, without the necessity of further demand for payment.
An Early Repayment Tax Clause is a provision in a loan agreement that allows the borrower to repay the loan early if changes in relevant tax legislation increase the amount of interest payable.
A facility fee is a charge that a borrower must pay to a lender for the opportunity to borrow additional funds. Typically applied in syndicated loan agreements, the facility fee compensates the lenders for making credit available.
A grace and notice provision gives borrowers extra time to make required payments or comply with loan terms before being classified as in default in a loan agreement.
A late charge is a fee charged by a lender when the borrower fails to make a timely payment on their loan or credit account.
Loan Closing refers to the final step in the process of securing a loan, particularly in real estate transactions. It encompasses all activities that transpire when the borrower and lender settle the terms and conditions of the loan agreement.
The base interest rate defined in the loan agreement, to which the spread is added in order to establish the interest rate payable on a variable-rate loan.
A clause in a loan agreement or bank facility stating that the loan will become repayable if there is a material change in the borrower's credit standing. The clause can be contentious because it is not always clear what constitutes a material change.
A detailed understanding of a mortgage commitment helps both borrowers and lenders formalize the loan process and prepare for property transactions.
Mortgage discount refers to the amount of principal that lenders deduct at the beginning of a loan as part of the loan agreement terms, which is often linked to discount points.
A covenant in a loan agreement wherein the borrower commits to refrain from securing new borrowings during the loan's term or ensures equal and rateable security for any new borrowings, as specifically defined.
The nominal loan rate, also known as the face interest rate, is the interest rate stated on a loan agreement or financial instrument without adjusting for inflation or other factors that could affect the real cost of borrowing.
A non-ratio covenant is a form of covenant in a loan agreement that includes conditions relating to the payment of dividends, the granting of guarantees, disposal of assets, change of ownership, and a negative pledge.
Novation refers to the cancellation of rights and obligations under one legal agreement and their replacement with new ones under another agreement. This process typically results in a change in the identity of one of the parties involved, such as in loan agreements.
A covenant in a loan agreement where the borrower promises that the loan in question will rank equally with its other defined debts, ensuring no preferential treatment among creditors.
A provision in a mortgage that allows some of the property pledged to be freed from serving as collateral when certain conditions are met.
Pre-approval is a critical step in the mortgage application process where a lender agrees to provide a loan amount to a borrower under certain conditions. It signifies a preliminary agreement from the lender, boosting the borrower's bargaining power during home purchasing.
A Ratio Covenant is a form of covenant in a loan agreement that includes conditions relating to financial ratios such as the gearing ratio and interest cover.
A bank nominated under the terms of a loan agreement to provide the marker rates for the purposes of fixing interest charges on a variable-rate loan.
A limited reserve set aside systematically by an issuer over time to repay debt or to replace an asset in the future.
A syndicated bank facility, also known as a syndicated loan, is a very large loan provided to a single borrower by a consortium of banks and financial institutions, typically led by a lead bank.
A term loan is a type of loan provided by a bank to a company with a set repayment schedule. The loan is usually drawn down immediately or shortly after the agreement is signed, based on the amortization schedule.
