Reference · Glossary
Mortgage-note investing terms, defined.
The terms a note buyer needs when reading a listing and underwriting a deal — the figures that set price and risk, the position that drives recovery, and the records that confirm a seller can actually sell.
- Unpaid principal balanceUPB
- The principal still owed on the loan, excluding interest, fees, and escrow. It is the base figure most note pricing is quoted against.
- Loan-to-valueLTV
- The loan balance divided by the property's value, as a percentage. A higher LTV means less equity behind the loan and more risk if it defaults.
- Investment-to-valueITV
- The price you pay for the note divided by the property's value. Unlike LTV it reflects your basis, so it measures your actual protective-equity cushion.
- Broker price opinionBPO
- A licensed broker's estimate of a property's value, typically with an as-is value, a repaired value, a quick-sale price, and comparable sales. It is cheaper than a full appraisal and common in note diligence.
- Lien position
- Where a loan sits in the order of claims against a property. A first lien is paid before a second; a junior lien recovers only after senior liens are satisfied, so position drives recovery risk.
- Seasoning
- How long a loan has been in place and how consistently it has been paid. A well-seasoned note with a clean payment history is lower risk than a newly originated one.
- Chain of title
- The recorded history of ownership and assignments for a property and its note. A clean chain confirms the seller has the right to sell; a gap or mismatch is an enforceability risk.
- Judicial vs. non-judicial foreclosure
- Judicial foreclosure runs through the courts and is slower and costlier; non-judicial foreclosure follows a statutory process outside court and is generally faster. The state's process sets the timeline and cost of recovering collateral.
- Land contract
- A seller-financed purchase where the buyer takes possession and pays over time while the seller retains legal title until it is paid off. It is a common note-investing instrument with its own recording and enforcement rules.
- Automated valuation modelAVM
- A software-generated estimate of a property's value from public records and comparable sales. It is fast but can be unreliable in areas with sparse or volatile sales, so it should be corroborated, not trusted alone.