A loss payable clause is a provides insurance coverage to a lender (mortgagee) when property used as security for a loan is destroyed or damaged.

This type of insurance terms can provide protection for both real property and personal property.

For example, if a house that is mortgaged is condemned due to structural problems that was not present when the property was first used as collateral, and the borrower defaults on the home loan, then the bank would be able to claim for losses up to the outstanding balance on the mortgage. read more

An escalator clause is a provision is a loan agreement that gives a lender the permission to increase interest rates as much and as often as they deem fit.

While such a clause effectively allows a bank to charge as much as they want for their loans, banks have to consider various factors before taking any actions that might be deemed as an abuse of their rights.

This is because borrowers can easily switch and refinance their home loan with other lenders if they feel that they are being taken advantage of by their lenders. read more

A deficiency judgment is a court order obtained by a creditor to be paid an amount owing as proceeds from repossession and foreclosure are insufficient to cover for the full amount owed.

Such legal judgment claims enable lenders a means to collect the money that borrowers owe them as stated in a promissory note when they are unable to get the total balance they are due.

In short, the security for a loan is insufficient to fully satisfy a debt that has defaulted. read more

The back-end ratio measures the debt against a borrower’s personal income to help lenders assess whether a loan can be approved, and if yes, at what amount.

This ratio is one of the various formulas and equations that lenders use to evaluate the borrowers’ affordability, in particular debt versus income, when applying for loans and credit facilities.

The resulting figure basically shows a screenshot of the percentage of debt against an individual’s qualifying income. read more