Glossary - D

In law, the term damages denotes the financial recompense that a claimant seeks or is awarded by a court of law for causing loss or injury through any deliberate action. The expression also includes the sum awarded by a court as a fine for breach of a contract or of a constitutional duty. Any person who has suffered any loss, damage or harm by means of any illegal actions, omission or negligent act of other is entitled to recover damages. There are basically seven types of damages - general, special (specific), nominal, substantial, punitive (exemplary), liquidated and unliquidated.
In the context of investment, the term debenture denotes a promissory note or a corporate bond that is generally backed only by the reputation of the borrower. In other words, a debenture refers to an unsecured debt supported only by the integrity of the borrower and not by any collateral. It is generally documented by an agreement called an indenture. Occasionally, a debenture is backed by specific assets, such as a real estate property, owned by the borrower. In matters pertaining to real estate, a debenture may have an effect on particular real property or other assets by means of a fixed or documented mortgage on stipulated property or assets. Alternately, a debenture may have a broader spectrum and enclose a floating mortgage on possessions and assets that are not conditional on a fixed mortgage. A debenture concerning a fixed mortgage on a precise real property is generally recorded against the land. On its own, a debenture can be listed a document much like a mortgage or one is also be recorded by caveat (a formal notice or warning). The process of registering a debenture is likely to differ from one provincial jurisdiction to another.
Debt ratio
In the context of lending business, the term debt ratio denotes one of the numerous generally used financial quotients founded on data included on the balance sheet, profit or loss statement or a permutation of both. The debt ratio can be calculated by dividing the debt capital by total assets. In other words, the most common instance of debt ratio is the quotient of the full liabilities to total assets that determines the percentage of assets funded by means of borrowings.
Debt service
In the context of real estate, the term debt service refers to the payment of principal and interest outstanding on an existing debt. In other words, the expression debt service denotes reimbursement of interest for using money obtained through a mortgage.
Debt-to-income ratio
The term debt to income ratio, also called DTI, refers to a figure that computes the amount of an individual's earnings is spent on paying his or her debts. The higher the debt to income ratio of an individual, the more percentage of their income is spent in repaying debts. In other words, the debt to income ratio denotes determines a person's future housing expenditures every month, including the proposed mortgage (debt) payment, property tax and insurance premium vis-à-vis his or her income every month. It is essential to manage one's debt to income ratio, as this is something that financial institutions or individual lenders take into account while appraising loan credit worthiness. In the instance of a person's debt to income ratio being too high, lenders would believe that the person may not possibly repay the debts without problems and would eventually be less inclined to grant a loan. Usually, mortgage lenders recommend that one should not spend more than 33 per cent to 40 per cent of his or her monthly income on housing expenses.
In matters pertaining to law, the term declaration generally refers to a court's judgment or an award by an arbitration tribunal that is a compulsory arrangement of the rights or other legal relations of the concerned parties that does not offer or order enforcement. In the context of real estate, the term denotes the establishment of a condominium corporation that develops the condominium and delineates the duties and liabilities of the owners as well as the corporation.
A deed is a legal certificate or instrument which enables the owner of a real estate asset to transfer his or her ownership rights or title in the property to another party. Usually, a deed is linked with registry, while the term 'transfer' characteristically relates to land titles. In order to execute a deed it must be mentioned on its face that it is a deed, precisely portray the property that is the subject of the deed, should be duly and reliably signed in the presence of a specific number of witnesses and be delivered to the grantee or the new owner of the property as a deed. Some deeds may enclose limitations or covenants that are executed although unnecessary or not endorsed by any significance.
Deed of trust
This term denotes an agreement among three parties - a trustor or the borrower, a trustee or a neutral party and a beneficiary or the lender, for the transfer of the title to the trustee as a security for carrying out of specified responsibilities. The application of a deed of trust is common compared to a mortgage, in select areas of North American authority. For instance, unlike in Canada, a mortgage agreement involving a mortgagor and a mortgagee is not applicable in California. As an alternative, the borrower, referred to as the trustor in this case, provides a legal title to a trustee to be retained on behalf of the lender who is referred to as the 'beneficiary'. When the loan is paid back in full, the trustee, who is a neutral party, returns the title to the trustor. But in the case of a default, the trustee is entitled to move to foreclose the property on behalf of the lender or beneficiary. Advocators of the deed of trust say that compared to the conventional course of action of a mortgage, it takes a shorter period for foreclosure of a property.
In simple words, default denotes the failure to meet the terms of an agreement. In matters pertaining to mortgages, this situation arises when the borrower or mortgagor fails to make regular monthly payments against the loan. When a mortgagor fails to make two or more monthly repayments, they are considered as official defaulters. In addition, default also denotes violation of other terms of a mortgage agreement, like making an attempt to pass one's loans on to another purchaser when the mortgaged property is sold. Such a situation may actually set off the loan agreement's due-on-sale section. Any of these defaults may result in the foreclosure of a mortgagor's property.
The term defeasance refers to a prerequisite in an agreement that offers the scope of its annulment in particular situations. For instance, a defeasance clause in a legal document pertaining to a trust routinely results in the trust property's ownership to regress from the trustee to the borrower when the debt is cleared. In other words, defeasance denotes a clause in a mortgage agreement that cancels an obligation following the execution of specific acts or condition mentioned in the agreement. In fact, the clause stipulates that the borrower or mortgagor is entitled to redeem the mortgaged property following the payment of the total balance loan amount. When the debt is paid in full, the mortgagor is able to acquire a release or discharge from the lender or mortgagee. When the release is obtained through a court order, it is also called legal defeasance.
Deferred payment loans
The phrase deferred payment loans denotes reverse mortgages that offer rounded sum for undertaking repairs or home improvements. Such loans are rarely issued and are normally offered by the provincial or local governments.
Deficiency discount
In the context of real estate, the term deficiency discount refers to a decrease or lessening in the rent to encourage a tenant to put up with an inferior quality or substandard apartment. In this regard, the expression substandard does not denote a breach of any legal prerequisite influencing tenancies, but, to some extent, the common state of the apartment house concerning things like decoration, general appearance as well as absence of some additional facilities, for instance, a pool. It may be noted here that the provincial occupancy laws may possibly restrict, if not, influence the use of deficiency discounts.
Broadly speaking, delinquency refers to a status where a borrower or mortgagor fails to pay the monthly payment on the scheduled date. When a mortgagor fails to make one monthly payment on due time, he or she is called a delinquent. And when they miss more such monthly payments, they become defaulters.
Delinquency rate
In matters pertaining to real estate, the expression delinquency rate refers to the number of mortgages where the payment of the outstanding loans is overdue articulated terms of an entire mortgage portfolio. Statistically speaking, the term denotes the number of loans with delinquent payment divided by the number of loans in a payment. Occasionally, this rate is founded on the total dollar volume of the debts, as an alternative to the number. Usually, delinquency is eligible to include only loans where payments are outstanding or overdue for three or more months.
Demand factors
Generally speaking, the term demand factor refers to a condition that decides on a consumer's aptitude and affects his or her eagerness to buy a merchandise or product. However, in matters pertaining to real estate, the aspects influencing the demand comprise the following:
- Demographics: Change in populace, size, family arrangement rates, and development of the household as well as relocation.
- Consumer Financial Status: Employment inclinations, different stages of income, the sum of disposable earnings, number of salary earners and personal investment rates.
- Mortgage Financing: Highest loan sums, lending quotients, interest charges, prerequisites for qualification and the lending strategies.
- Consumer Approaches: The buoyancy in the common market.
Demand loan
In the lending business, the term demand loan refers to a loan that is repayable on demand or without any advance notice, rather than a precise date. In other words, it is an understanding usually between a business client and a financial institution allowing loans to a highest amount of credit permitted for that particular business. In such instances, the borrower only pays the interest till the principal is cleared, or until the lender demands the reimbursement of the principal amount. However, the borrower may pay off the loan early, without incurring a prepayment penalty. In this case, a primary credit plane is set up depending on the credit worthiness as well as cash flow capability of the business. Generally, the line is restored every year when the financial statements are presented and when the declared rate of interest rises and falls with the prime rate. In general, the real estate brokers ought not to depend on a particular line of credit to acquire assets. Alternately, they should just meet the short-term functional prerequisites.
In matters pertaining to a real estate, deposits denote payment of cash or any other valuable as a security to fulfill the stipulations of a mortgage agreement. In case the borrower turns a defaulter or fails to make the monthly mortgage payments, the deposit money or valuables are forfeited as a penalty. On the other hand, if the obligations mentioned in the agreement are fulfilled, the deposit is considered to be a partial payment towards the purchase price of a real estate asset. In real estate transactions, deposits may be paid with cheques or in cash. In this case, the deposits have two purposes. On the one hand, deposits is an indication of good faith and genuineness on the part of the person making the deposit, on the other, it denotes a part payment towards the purchase price of a property. Normally five to ten per cent of the price offered for the purchase of a property is given as a deposit and this gesture manifests trust in the transaction.
In general the term depreciation denotes an act of lessening or seeking to lessen price, value or worth of something. In matters pertaining to real estate, the term denotes a decline or reduction in the value of a property. Depreciation is just the opposite of appreciation.
Development loans
A development loan, also known as construction loan, is an advance payment by a lender to a company for the precise function of overhauling and developing a plot of land up to the point of erecting a construction. Usually, the term of a development loan varies between one to three years. The disbursement of the loan takes place when the tuned-up land is sold to builders or to a common developer for the erection of new residential buildings, a plaza or a rental project. In general, development loans are not paid back or amortized over a definite period of time, but they take the form of a collateral loan with particular guarantees and the interest payments are made all the way through the term of the mortgage.
Discharge of mortgage
This term refers to the repayment of a mortgage or a document from the lender that substantiates that the borrower is under no further legal responsibility to the lender vis-à-vis the loan. Moreover, the discharge of mortgage is provided by the mortgagee and recorded with the land registry or land titles office when the mortgage has been paid up completely or if the loan does not stand as a security any more.
Down payment
Down payment represents a portion of the cost of something being purchases and is made to lock the right to continue to make further payments towards the purchase. In matters pertaining to real estate transactions, down payment is an upfront payment made by a home buyer in cash that does not finance with a mortgage. Normally, the more the down payment, the better is the prospect of securing a mortgage. A home buyer may avail the best mortgage plan in the market by making a down payment of around 20 per cent of the real estate asset's value.
Due-on-sale clause
A due-on-sale clause is a clause in a mortgage loan agreement or promissory note that stipulated that the lender may demand the full payment of all balance amount of the loan when the borrower sells the property or transfers the ownership rights of the property on another person. In such circumstances, the lender has the right, but not the compulsion, to call the note. In fact, almost all current mortgage contracts in the United States contain this clause.
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