- Abatement is the reduction in the amount of tax a company or individual has to pay. An example of abatement includes a rebate or a deduction. Some cities have property tax abatement that can significantly reduce property tax on homes.
AbsorptionAbsorption refers to the rate at which homes are sold in a specific property market during a period of time. It can be calculated by dividing the total number of homes available by the average amount of sales per month. For example, if a town has 2,000 properties for sale and buyers purchase 200 homes per month the supply of homes will be gone in 10 months (2,000 properties divided by 200 homes sold per month).
Acceleration clauseIn a contract the acceleration clause allows the lender to require that the borrower repays part of all of an outstanding loan if specified requirements are not met.
Accredited investorAn accredited investor is a term used to refer to financially sophisticated investors who have a special status under financial regulation laws. An example of an accredited investor could be a high-net-worth individual, a bank or a large corporation.
AccrueAccrue refers to the ability for something to grow over time (accumulate). In finance and property, it is most frequently used when referring to interest.
Adjustable-rate mortgage (ARM)An adjustable-rate mortgage is a mortgage where the interest rate paid on the outstanding amount varies in relation to a specific benchmark. This type of mortgage is often referred to as a 'floating-rate mortgage' or a 'variable-rate mortgage’. An example of this may be a mortgage with a rate of 1%, but then in the third year the rate adjusts to an agreed upon benchmark. This has caused problems in the past when buyers did not anticipate the level to which the rate would adjust. However, the rate can also adjust down, benefitting the borrower with lower payments.
Adjusted tax basisAdjusted tax basis is a measure which works out the loss or gain on the sale of an asset or security.
Adverse/impaired creditAdverse or impaired credit is a term used to describe a poor track record of repayment history on credit cards or loans. This is reflected in an individual’s credit report.
AmortisationAmortisation is paying off one’s debt through regular payments over a set period of time. Consumers often encounter amortisation when paying off a home mortgage or car finance. For instance, if you were to borrow from LendInvest you would encounter amortisation as we request that loans be paid in monthly instalments.
Anchor tenantAn anchor tenant is the individual or person who is serving as the main attraction in a commercial property. For example, if a retail centre has one large department store in the middle of it, the department store may be considered the anchor tenant.
Ancillary tenantIn direct contrast to an anchor tenant, ancillary tenants are the smaller tenants of commercial space.
Annual equivalent rateThe annual equivalent rate (AER) shows what the interest rate on an account would be if interest were paid for a full year and compounded.
Annual percentage rateThe annual percentage rate (APR) is the annual rate that is charged for borrowing. It is a percentage that shows the yearly cost of funds over the term of a loan.
Annualised returns (loan)The annualised return is the net return per annum of each loan. For example, on the LendInvest platform annualised returns typically range from 5% per annum up to 9%.
Anti-money laundering (AML) checksAnti-money laundering checks are an essential part of the Know Your Customer (KYC) procedure which help prevent money laundering, identity theft and identity fraud. In practice, they involve collecting a customer's name, date of birth, an official document confirming their identity and a residential address. At LendInvest, we take our AML checks very seriously to ensure our customers are always protected. For example, at the point of an investor registering we may require extra documents, such as passports, utility bills and bank statements.
AppraisalAppraisal is the valuation of a property conducted by an authorised person.
AppreciationAppreciation is the increasing value of an asset or security over time. For example, vintage cars increase in price as they get older due to a restricted supply, this is known as appreciation.
ArrearsIf an account is in arrears it is considered to have overdue debt as a result of missed payments.
Asset turnoverAsset turnover is a measure of a company's ability to effectively use its assets to generate revenue. The ratio of asset turnover is calculated by dividing sales or revenue by total assets held.
Asset-backed security (ABS)An ABS is a security backed by receivables, a loan or a lease. These can be an alternative to investing in corporate debt.
AssetsAn asset can be classed as anything with a financial value that will provide a future benefit to the owner. For example, owning a property is commonly seen as owning an asset, as it is assumed the value of a property will increase with time.
Assumable LoanThis type of loan allows an outstanding mortgage to be transferred from the current owner to the buyer. By taking on the previous owner's debt the buyer avoids having to obtain their own mortgage.
Assured Shorthold TenancyAn Assured Shorthold Tenancy allows a landlord to possess the property immediately after the initial agreed period. Therefore, the landlord can evict a tenant after the agreement period without a legal reason.
Available (Loan Amount)Available Loan Amount shows the amount remaining to be invested in each loan. For example, a commercial bridging loan in Highgate was for £1million but £750,000 has been sold to investors, therefore you can invest a minimum of £100 in this loan or a maximum of £250,000 as that is the ‘available remaining’.
BalanceBalance is the amount of money available in a financial account. It can also refer to the remaining amount owing to a lender or creditor. A person's current account has £1,500.00 in it. This is their balance. On the other hand, if the person borrows £300,000 for a mortgage, and after 10 years, owes £170,000, this is the outstanding balance owed.
Balance (Account)The balance shown for your LendInvest account is the amount you currently have left to invest in our loans on the platform. For example, if you top up your account for the first time with £500, once processed your balance will be £500. As you then invest in loans your balance will decrease and your portfolio will increase.
Balloon PaymentA balloon payment is a payment at the end of a non-amortized loan. If a person borrows money and agrees to not make monthly payments, but make one big payment at the end, this payment is known as a balloon payment
Bank of England Base RateThis rate is the British Governments key interest rate for dictating the monetary policy. The bank rate is the interest the Bank of England charges banks for overnight secured lending.
BankruptcyBankruptcy is an official legal status of an entity or individual that cannot repay the debt it owes to creditors.
Basis PointA basis point is a unit of measure for interest rates. One basis point is 1/100th of 1%, or 0.01% and is used to identify the percentage change in a financial instrument. If you borrow at a rate of 2.35%, you are borrowing at 235 basis points, or bps
Blind PoolA blind pool is a type of limited partnership which has does not specify the investment plan the partner plans to use.
BondsA bond is a type of debt investment allowing an investor to lend money to a company which borrows the funds for a set period of time at a fixed or variable interest rate. You can find information on the LendInvest listed bonds here.
BorrowerA borrower is a legal name for an individual using funds from a business or individual for a set period of time upon the condition of promising to repay the loan. At LendInvest our borrowers range from Property Entrepreneurs to large scale Property Developers.
Bridge loanA bridge (or bridging) loan is a short-term loan that is used until long-term finance can be secured. This allows the borrower to meet immediate obligations by providing a cash flow instantly. These loans are often short term with higher interest rates. Examples of where our borrowers at LendInvest might use a bridging loan:
- Purchasing a property at auction where there is a quick completion deadline.
- Refinancing a property to raise capital.
- Purchasing or refinancing a property that requires renovation and is unmortgageable in its current state.
BridgingBridging is a more colloquial, shortened term for bridging finance. A bridging loan is a short-term loan used until long term finance can be secured.
Bridging loan calculatorOur bridging loan calculator provides an approximate guide to all the costs associated with taking out a bridging loan (short term finance facility).
BrokerA broker (see also Intermediary) is a professional who acts as a middleman in negotiations and transactions. A broker often receives commission for introducing the two parties.
Broker Price OpinionA broker's price opinion is the value of a real estate property determined by a broker or other qualified agent.
Buy and HoldBuy and Hold is a type of investment strategy describing when an investor buys and holds stocks for a long period of time, regardless of changes in the market.
Buy-Sell AgreementA Buy–Sell agreement is a legally binding agreement between co-owners of a business that states what happens if a co-owner dies or is otherwise forced or chooses to leave the business. For example, If a part-owner of a business wishes to sell, he or she must sell to the other part-owners or another person named in the agreement. The price of that part of the business is named in the agreement.
Buy-to-let (BTL)Is a term used to describe when a property is purchased with the sole purpose of letting/renting it out. There are Buy-to-Let mortgages specifically designed to facilitate this purchase.
Cap RateThe Cap Rate, otherwise known as Capitalisation Rate is the rate of return on a property investment based on the expected income it should generate. It is most commonly used to work out the potential return on investment. You can calculate the cap rate by diving the current market value by the net operating income.
CapitalCapital is money that is used to generate income or make an investment. For example, investors at LendInvest invest their ‘capital’ in the loans shown on the platform.
Capital CallCapital Call is the request and transfer of money that has been promised by investors to fund a company.
Capital GainCapital Gain is an increase in the value of an asset making it worth more than it was bought for. If a person buys a house for £300,000, and in 5 years they sell it for £500,000, the increase in value (£500,000-£300,000=£200,000) is the capital 'gain'.
Capital Gains TaxCapital Gains Tax is tax on the profit when you sell an 'asset' that’s increased in value. It is the gain you make from the sale that is taxed.
Cash FlowCash flow is the total amount of cash moving in and out of a business.
Cash on Cash ReturnWhen investing, the cash on cash return measures the cash income on the cash invested. The way this is calculated is: Annual Income divided by Total Investments
Certificate of Good Standing (Certificate of existence)This is a certificate issued to verify that a corporation exists and is authorised to do business. It is also known as a certificate of authorisation or certificate of existence.
Client Asset SourcebookThe Clients Asset Sourcebook (CASS) is part of the FCA's handbook which explains the requirements relating to holding client money and assets.
Commentary (Loan)The Commentary provided on the LendInvest platform is a full description of the property you are investing in. For example, the commentary will provide investors with information such as the location, transport links and potential plans.
Commercial PropertyCommercial Property is property used purely for business purposes.
Common EquityCommon Equity is the amount that all common shareholders have invested in a company. This includes the value of the common shares themselves.
Comparative Market AnalysisComparative Market Analysis (CMA) is an analysis of all nearby recently sold homes which are comparable. This helps establish a price range for a house about to be put on the market.
Compound InterestCompound interest is interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan.
Core HoldingCore Holding is a long term investment strategy which forms the basis of an investor's portfolio. A core holding strategy could be to primarily own an S&P 500 index fund, this then allows an investor to be riskier in other areas of the portfolio.
Core PlusCore Plus is a fixed income investment style that allows investment managers to add higher risk holdings with potential greater returns to core portfolios.
County Court Judgement (CCJ)A County Court judgment is a court order sent by a County Court to collect money on which you owe. It’s one of several methods your creditors can take in the debt collection process.
Credit RatingA Credit Rating is an assessment of the ability for an individual or organisation to meet their financial obligations. This is based on previous purchasing and spending history.
Credit Reference AgencyThe Credit Reference Agency is a corporation which collects credit rating information for individuals and then provides this to financial companies in order for them to be able to understand an individual's credit worthiness.
Credit ReportA Credit Report is a report detailing an individual's credit history. This is prepared by a credit agency and can be used by a lender to determine how creditworthy an individual is in the loan application phase.
Credit ScoreA credit score is used by lenders to determine whether you qualify for a particular credit card, loan, mortgage or service. For example, a credit score takes into account the amount of available credit your currently using, history of credit payments and public records.
Credit SearchA Credit Search, also known as a credit check is the process of evaluating an individual's credit history in order to understand the likelihood that the individual will be able to meet their obligations.
Current assetsThe amount of cash and other assets an individual or business has that are expected to be converted into cash within 12 months.
Debt ConsolidationDebt consolidation is the act of taking out a new loan in order to pay off other outstanding debts.
Debt LendingDebt lending is the act of a business raising capital by borrowing. In most cases this is done by companies issuing bonds or other debt security.
Debt ServiceDebt service is the amount of money required to pay back the interest and principle on a debt. For example, when borrowers are paying back a debt it is known as ‘servicing the debt’.
DeedDeed is a written legal document that transfers ownership of property. The deeds of a property include a description of the property and the names of new and old owners. It is signed by the individual transferring the property.
DefaultDefault is the failure to repay a loan according to the terms set out in the contract.
Delinquent DebtDelinquent is a term given to debt when it is owed for more than 30 days. Although a debt is considered delinquent after 30 days primarily it is only after 180 days that it is called ‘delinquent’.
DemographicThe study of demographics relates to understanding the population based on different factors such as age, sex, income, employment type. Demographics allow companies to access their potential market. For example, a company selling high end luxury cars would benefit from knowing how many people earn over £60,000 in order to be able to afford the product.
DepreciationDepreciation is a reduction in the value of an asset overtime. For example, the economic crisis in 2008 saw share prices depreciate by as much as 50%.
Discounted Cash FlowDiscounted Cash Flow or DCF is a measure used to understand the attractiveness of an investment. The method uses future free cash flow estimates and compares them to the present value estimate.
DistributionsDistribution is known as a companies’ payment of stock, cash or physical assets to its shareholders.
DiversificationDiversification is a risk management technique used by investors to ensure a wide variety of investments are made across one portfolio. For example, if you were to diversify your investments using LendInvest you could invest across loans in different locations, with different LTV's.
Due DiligenceDue Diligence is the process of audit or investigation on a person or company prior to becoming involved in a business arrangement. For example, we carry out thorough due diligence on all of our borrowers from an ID check to site visits.
Early Repayment Charge (ERC)Early Repayment Charge or ERC is a fee that you may have to pay if you repay part of a loan early.
EarningsEarnings are the amount of money that a company or individual produces during a specific period.
EncumbranceAn Encumbrance is a charge against a property by someone other than the owner. The most common type of encumbrance is a mortgage.
EntityAn entity can be a business, person, organisation or partnership that has a legal and independent existence.
EquityEquity is the value of an asset minus all the liabilities attached to the asset. It is calculated using the formula, Equity = Assets - Liabilities. For example, in the context of property the difference between the market value of the property and the amount the owner has outstanding on the mortgage is known as the equity.
EscrowEscrow is a financial instrument belonging to a third party on behalf of a buyer and a seller. Once funds have been exchanged between two parties they are held by the escrow service until all obligations have been fulfilled. For example, if you pay a deposit for a hotel the funds are held in escrow or by an escrow service until you have checked out.
Exit StrategyThe method by which a borrower intends to repay their loan. A common example of an exit strategy that a borrower may have with a LendInvest loan is using the proceeds of the sale of a property to repay their bridging loan.
Fair Market ValueFair Market Value is an estimate of the market value of a property based on what a knowledgeable, willing buyer would pay to a knowledgeable and willing seller.
FICO ScoreThe FICO score is a credit score used by lenders to asses a borrower’s credit risk. This makes up a substantial portion of the credit report. FICO is the acronym for Fair Isaac Corporation.
Financial Conduct Authority (FCA)The FCA is a financial regulatory body in the UK. They regulate financial firms providing services to consumers to ensure the integrity of the UK's financial markets.
Financial Services Compensation Scheme (FSCS)The FSCS is the statutory compensation scheme for customers of regulated financial services companies. As a result, the FSCS can pay compensation if a company is unable or unlikely to pay claims against it.
FinTechFinTech (short for Financial Technology) is the term given to the industry made up of financial companies that employ the use of technological advancements to enhance or streamline the consumer experience and disrupt the processes of incumbent financial institutions.
First LienA Lien is the legal right of a lender to repossess collateral if a borrower is unable to fulfil their obligations. Thus, the first lien gives the lender the highest priority over the collateral.
Fix and FlipFix and Flip is a relatively new term used to describe the concept of renovating a property before selling it. This is done in hope that it will add value to the property.
ForeclosureForeclosure is the legal process a lender goes through if they need to recover funds from a borrower who has not paid their loan. In the case of property, the lender would sell the property which was used as collateral for the loan.
Free Cash Flow (FCF)Free Cash Flow is the amount of cash a business has after accounting for all expenditures.
General PartnerA General Partner is also commonly a managing partner, this means they have an active role in running the business.
Green BuildingA Green Building also known as a sustainable one, refers to a building which is sustainable and resource efficient throughout the building's life cycle.
Gross AmountGross Amount refers to the total amount of something before any deductions are made. For example, your gross income is your income before tax and national insurance have been deducted.
Gross Development Value (GDV)The GDV is the estimated value a new property or development will receive on the open market in that current economic climate.
Ground LeaseA Ground Lease is a long term lease on land (often 99 years) for the purpose of building or making land improvements. At the end of the lease the land and all buildings on the land return to the owner of the land.
Guarantor LoansA Guarantor Loan is an unsecured loan which requires a guarantor to sign the credit agreement. The purpose of the guarantor is to agree to pay the borrowers debt if he or she defaults on repayments.
GuarantyA Guaranty is formal assurance that conditions will be fulfilled.
Hard AssetHard Assets are physical items such as property, oil and precious metals. They are considered valuable because they can be used to purchase goods and services.
Hedge (Inflation)A 'Hedge' is an investment which reduces the risk of price movements on an asset. Usually hedging involves taking an offsetting position in a related security.
Hold PeriodA hold period is the length of time an asset was held for.
Holdback (Reserve)Holdback is a set amount of money that is held or unpaid until certain obligations are met.
House in Multiple Occupation (HMO)A House in Multiple Occupation is a property which houses several different individuals who then share facilities such as the kitchen and bathroom. An example of this would be several students sharing a home near their university.
Illiquid AssetAn Illiquid Asset is one that cannot be sold easily. There is usually a lack of investors willing to buy this asset.
In-Fill DevelopmentIn-Fill Development is the development of land that is surrounded by developments/buildings in an existing community. Thus, the term 'In-Fill' implies the new development is filling in the gaps.
Income MultiplesAn Income Multiple is the factor by which a lender will multiply a borrower's gross annual salary to determine their borrowing capability.
Income PropertyAn Income Property is one that has been developed or brought for the purpose of renting out to create an income.
Indemnity PolicyAn Insurance Policy that protects business owners and employees when they are found to be at fault due to an error.
Individual Voluntary ArrangementAn Individual Voluntary Arrangement (IVA) is an agreement made with creditors to pay of parts of an individual’s debt. It is a formal alternative for individuals wanting to avoid bankruptcy.
Industrial PropertyIndustrial property is a form of commercial property that is designed for the use of manufacturing or warehousing for example. An example of industrial property is a warehouse that is used to manufacture cars.
InflationInflation is the rate at which prices for goods and services increases. The Bank of England try to limit inflation and prevent deflation to ensure the economy runs effectively. The reason a pint of beer cost £4 last year and is now £5, is due to inflation. This may be caused by small increases in the ingredients of the beer, or the rents charged to the pub owner, so they must increase their price to cover these costs. This generally upward trend in prices is the inflation
Institutional LendingInstitutional Lending is a loan that is provided by a lender that is regulated by law.
InterestInterest is the charge payable for borrowing money, or the money earned on an investment. You will often see interest presented as an annual percentage rate.
Interest Cover RatioInterest Coverage Ratio is used to measure a companies or individual's ability to pay interest on their debt. It is calculated by dividing the company's earnings before interest and taxes by the interest expense.
Interest StatementA document stating the amount of interest earned during a defined period.
Interest-Only LoanAn Interest-Only Loan is a loan whereby the borrower only pays interest on the principle balance.
IntermediariesIntermediaries, sometimes referred to as brokers, are professionals who act as a middleman between two parties. For example, an intermediary may liaise with LendInvest to obtain property finance on behalf of their client.
Investment OpportunitiesAn Investment Opportunity can occur in any situation where an individual is offered the option to buy and asset/security that has the chance to gain value in the future.
InvestorAn Investor is a person who invests money with the expectation of a financial return.
Joint VentureA Joint Venture occurs when two or more individuals get together to achieve a specific task.
Judicial ForeclosureJudicial Foreclosure is a judgment made in court in favor of a foreclosure of a mortgage, which orders that the property used to secure the loan should be sold to pay the debt.
Know Your Customer (KYC)Know your customer (KYC) is the process of a business identifying and verifying the identity of its clients.
LenderA Lender is an individual or organisation that lends money. For example, as the name suggests LendInvest are classed as a ‘lender’.
Letter of Intent (LOI)A Letter of Intent (LOI) is a document outlining agreements between two or more parties before the agreements are finalised.
LeverageTo 'Leverage' is the ability to utilise equity within an asset to provide collateral for further debt facilities. For example, leverage is most commonly used when individuals obtain mortgages to purchase a home.
LienLien is the legal right of a lender to claim the assets/collateral from a borrower who has not met their loan obligations.
Limited LiabilityLimited Liability refers to a type of liability whereby a partner or investor cannot lose more than the amount they have invested.
Limited Liability Company (LLC)A Limited Liability Company is a corporate structure which prevents any members being held liable for company debts.
Limited PartnershipA Limited Partnership is two or more partners joining together to conduct business. The benefit of a limited partnership is that owners are not directly liable for any company debts.
LiquidityLiquidity is used to describe the degree at which an asset/security can be bought or sold quickly without impacting the price.
LoanA Loan is the act of lending a sum of money, property or asset in exchange for future repayment. Here at LendInvest we provide fast and flexible loans to individuals wanting to borrow money against property in England, Wales and Scotland.
Loan ExtensionLoan Extension is the act of giving a borrower additional time to repay to their outstanding debt. For example, we may extend a loan for 3-6 months if the borrower is looking to refinance.
Loan RepaymentLoan Repayment is the act of paying back money previously borrowed from a lender.
Loan to Income (LTI)Loan to Income also known as debt to income is a measure used which compares an individual's loan/debt payments to their overall income.
Loan-to-Cost Ratio (LTC)The Loan-to-Cost ratio is the amount of a loan used to finance a project compared to the total cost to build the project. If a development costs £1 million and the borrower asks for £700,000, the LTC ratio would be 70%.
Loan-To-Value (LTV) RatioThe “Loan-to-Value” ratio, known as LTV for short, is the ratio of the loan amount to the value of the property that we lend against. If a property is worth £1m and the LTV is 75%, we have lent £750,000.
MaturityMaturity usually refers to a date when a loan, bond or other debt instrument is due to be repaid in full. On the LendInvest platform the loan end date could also be referred to as the 'maturity date'.
Mezzanine FinancingMezzanine Financing usually refers to the financing between a company’s senior debt and equity. In a payment scenario mezzanine finance is secondary to the senior debt.
MLR checksMLR checks, short for Money Laundering Regulations, apply to banks, building societies and credit unions. They involve carrying out thorough due diligence and KYC checks to prevent money laundering or financing of corrupt businesses.
MortgageA Mortgage is a type of loan which is secured by the collateral of a specific property. The borrower must pay the mortgage back with predetermined set payments. For a residential mortgage, the lender has a claim on the property in case the borrower defaults on their payments.
Mortgage BrokersA Mortgage Broker is an intermediary that brings together borrowers and lenders.
Mortgage Market ReviewThe Mortgage Market Review was a comprehensive review of the mortgage market which set out the case for reforming the market to ensure it was sustainable and more effective for consumers.
Multi-Family HousingMulti-Family Housing is a unit that is built specially to house several families in different housing units.
National House Building Council (NHBC)The purpose of the NHCB is to raise the construction standards of new homes in the UK and provide consumer protection for homebuyers through its 10 year buildmark warranty.
Net Operating IncomeNet Operating Income is the annual income by a property after deducting all expenses occurred from the operations.
Net ReturnNet return is your gross income from an investment minus any deductions such as income tax or capital gains tax.
Net WorthNet Worth is a key measure of how much an individual or business is worth. It is the value of total assets minus total debt owed. Consider the following example, you own a property worth £250,000, a car worth £25,000 and an investment portfolio with a market value of £100,000. However, you have an outstanding mortgage balance of £100,000 and a car loan of £10,000. You therefore, have assets of £375,000 but debt of £110,000. So your net worth is £375,000 - £110,000 = £265,000
Nonrecourse debtNonrecourse debt is a loan secured by collateral (usually property).
Occupancy RateOccupancy Rate is the number of units in a building that have been rented out in comparison to the total number of units.
Offerings (Loan)LendInvest lends against Residential and Commercial properties, you’ll notice that the first column on the current loans page is called “Offerings”. The offering explains the type of property and where it’s located.
Open Market ValuationOpen Market Valuation or OMV is the price at which a property would sell for in a competitive auction setting.
Operating ExpensesOperating expenses are the expenditures incurred by a business in order to perform business as usual.
Ordinary IncomeOrdinary Income is the income earned from providing goods and services.
Origination FeesAn Origination Fee is a cost charged by the lender for processing loan application.
PartitionPartition refers to any division of property between co-owners.
PartnershipA Partnership is any cooperative endeavour undertaken by multiple parties.
Passive InvestorPassive Investors are investors which purchase investments for long term appreciation and limited maintenance.
Personal LiabilityPersonal Liability is a financial obligation that an individual is responsible for.
Personal LoanPersonal Loans are loans which are issued without a security/asset as collateral. They are also referred to as unsecured loans. For example, a personal loan may be a loan used to finance a wedding.
PortfolioA portfolio is a grouping of financial securities or assets (bonds, stocks, equities). They are either 'managed' by financial professionals or 'held' by investors.
Portfolio PerformancePortfolio Performance involves understanding how well a managed portfolio has performed in relation to comparison benchmarks.
Preferred EquityPreferred Equity is corporate shares that have more entitlements than normal shares. Preferred equity holders, as a result may be entitled to dividends.
Preferred ReturnPreferred Return is a common phrase used in the private equity world. It refers to the minimum annual return that limited partners are entitled to before the general partners receive carried interest.
PrepaymentPrepayment is the payment of a debt before it is due.
Prepayment PenaltyA Prepayment Penalty is a clause in a loan contract confirming that if a loan is pre paid before the due date a penalty will be applied.
Principal is the amount of money that is actually borrowed.
If for example you were to take out a £10,000 loan, this is the principal. By the time you pay back the loan, you may pay back £12,000 (depending on the interest rate). The £2,000 is the interest and the £10,000 is the principal.
Private PlacementA Private Placement is used as a way of raising capital. It involves selling securities to a limited number of investors which are usually mutual funds, banks or pension funds.
Pro-FormaPro-Forma is assumed or forecasted information presented ahead of the actual information. The purpose of this is to outline the anticipated cost associated with a project.
Prohibition NoticeA Prohibition Notice is a formal notice confirming that part of, or a whole property cannot be occupied. This is because the condition of the property is too dangerous to live in.
Project Payment Dependent NotesA Debt obligation tied to the performance of an underlying real estate asset.
Promissory NoteA Promissory Note is a written promise from one party to another that confirms a payment for a specified future date.
Property DevelopmentProperty Development is a business which ranges from renovating buildings to purchasing bare land and building on it.
Provision FundA Provision Fund is a fund that can be used to potentially cover investors against bad debt.
Public OfferingA Public Offering is the sale of equity shares to the public by a company who are looking to raise funds in order to expand their business.
Real EstateReal Estate is property made up of the land, buildings and natural resources on it.
Recourse DebtRecourse debt is typically a debt that is backed by a guarantee that the borrower will repay the debt.
RedemptionA Redemption occurs when an investors capital is returned. When investing with LendInvest 'redemption' occurs when the borrower has repaid their loan. Once the borrower has repaid their loan LendInvest will return investors capital by 5pm on the same day.
RefinanceRefinancing is the act of revising the way in which a debt is paid. For example, an individual may replace an older loan with a new loan that offers a more favorable rate.
RegulationRegulation, broadly speaking are rules imposed by the government with the intention of managing individuals and companies economic behavior.
REITA REIT, short for Real Estate Investment Trust, is a company that owns or finances real estate for the purpose of producing an income.
Residential PropertyResidential Property is property that is used as a dwelling. It can also be property that is in the process of being built or changed to become a dwelling.
Retail PropertyRetail Property also known as commercial property is property used purley for business purposes.
Retained interestRetained interest is interest that has been paid in advance and is deducted from the Gross Loan Amount.
Risk vs. ReturnThe Risk v Return tradeoff suggests that high risk investments will provide a greater return. And vice-versa
Second ChargeSecond Charge is a legal charge registered against a property as a way of securing a debt. They are known as secondary charges as they have secondary priority behind the first charge (usually a mortgage).
Second MortgageA second mortgage is a mortgage taken out on a property which is already mortgaged. For example, people may take out a second mortgage to finance large expenditures that they could otherwise not get a loan for such as private education.
Secured LendingSecured Lending is lending to a borrower which has secured an asset as collateral for the loan. For example, LendInvest only do secured lending as all of our loans are secured by first charge over a property.
Secured loanA Secured Loan is a a loan whereby the borrower provides an asset (e.g property) as collateral for the loan, which then becomes a secured debt owed to the loan provider if the borrower was to default. Here at LendInvest all of our loans are secured against first charge over a property located within England and Wales.
Securites and Exchange Commission (SEC)The SEC is a government agency that regulates the securities markets to protect investors.
Self Invested Personal Pension (SIPP)A Self Invested Personal pension is a government approved pension scheme allowing individuals to make their own investment choices from a list of HMRC approved investments.
Senior DebtSenior Debt is the debt on a loan that must be paid first.
Sensitivity AnalysisSensitivity Analysis is a method used to understand how sensitive a particular dependent is in relation to a set of independent variables.
Single Family ResidenceA Single Family Residence is a unit used as a single dwelling.
Special Purpose VehicleSpecial Purpose Vehicles also known as SPVs are entities that are usually created as subsidiary companies in order to isolate financial risk. Thus, if the parent company is to go bankrupt the assets of the SPV are still secure.
Standard Variable RateThe Standard Variable Rate is the long term rate of interest that borrowers will be charged once their fixed rate mortgage or tracker period ends.
Statutory ForeclosureThe process by which the borrower's rights in the property are extinguished and the lender becomes the legal owner of the property.
Sub-Market AreaA Sub Market is part of a wider market but has different, more unique operating factors.
Taxable IncomeTaxable Income is income that can be taxed by the government. You only pay tax on your taxable income. Examples of taxable income include work-related income, interest earned on savings and profits from renting out properties.
TenancyTenancy is the possession of land as a tenant.
Tenancy in Common (TIC)TIC is a shared tenancy agreement where all tenants hold an individual interest in the property.
Term RemainingFor each loan there is a minimum term and maximum term. The “Term Remaining” is the borrower’s deadline to repay their loan, Investors should be prepared to commit their funds for the whole duration of the loan. However, borrowers do also sometimes pay back early.
The Capital StackThe Capital Stack is how a company finances its growth using different sources of funds.
TitleThe legal basis of the ownership of property.
Title InsuranceInsurance obtained against unknown but existing title defects.
TrancheA portion of a security that has been split up into smaller pieces, all of which may be available for investment at the same time but may have different risk and return profiles.
Transaction CostsThe cost related to making an economic exchange.
Triple Net LeaseA lease agreement that holds the tenant (lessee) responsible for all costs related to the asset that is being leased.
TrustA Trust is a relationship between a trustor and a trustee. The trustor gives the trustee the right to hold an asset (including property) for the benefit of a third party.
TrusteeA Trustee is a individual or entity that has admin rights for assets (including property) for the benefit of a third party.
UnderwriteUnderwriting is a process whereby an underwriter will ensure your profile as a borrower matches the lenders criteria. The main purpose of it is to asses a borrower’s risk. The process is based on the 3 C's: Credit, Capacity and Collateral.
Undivided InterestUndivided Interest refers to individuals claiming ownership of commonly owned assets where they all have an unrestricted claim to the assets but no individual has an exclusive right to the whole asset.
Unsecured LendingUnsecured Lending is when a loan is issued and supported by only the borrower's creditworthiness, as oppose to a type of collateral. They are also known as personal or signature loans. An example of unsecured lending could be pay day loans.
Vacancy RateA Vacancy Rate (%) is used to show the number of available units in a property or complex in a certain time period.
Value-AddValue Add occurs when a business or individual takes a service or product and enhances it to give it a greater value.
VoidVoid can be used to describe something that is no longer valid.
WithdrawWithdrawing is the process of requesting for your available balance on the platform to be sent from LendInvest to a bank account in your name. You can find out how to withdraw your available balance here.
YieldYield is known as the return on an investment. You will usually hear yield used to refer to interest and it is usually shown as a percentage of the investment.
ZoningZoning refers to the control by authority of the use of land, and of the buildings on it. Areas of land are divided by authorities into zones within which various uses are permitted.