Glossary of real estate & financing terms

Repayment
Regular repayments against a loan (secured by a lien on immovable property) in defined instalments.

Loan-to-value (LTV) ratio
Defined percentage expressing the lending value of a lien to determine the permissible loan drawdown

Lending value
The value of a lien on immovable property that the lender takes as a basis when granting the loan secured by the lien on immovable property.

Creditworthiness and credit check
Assessment of a debtor or counterparty with regard to his/her ability to meet financial obligations. The credit check involves checking both creditworthiness (personal requirements that the borrower has to meet) and borrowing capacity (financial requirements that the borrower has to meet).

Capitalised income value
A property’s capitalised income value corresponds to the capitalised rental income/value that it can generate in the long run, or corresponds to the total of all future rental income/values, discounted to the time at which the valuation is performed..

Mortgage business
Real estate financing secured by a lien that is entered in the land register (e.g. mortgage certificate, mortgage contract). The lien must be legally enforceable.

Hedonic method
The hedonic method is a comparative value method that is based on the sale prices of similar and comparable properties.

Property development
Property development refers to the construction of properties and the realisation of real estate projects that are intended for sale, e.g. condominium or single-family home developments.

Realisation of lien on immovable property
Realisation of a property that serves as collateral to satisfy the claims of the creditor.

Credit risk
The risk that the borrower does not/cannot meet his/her obligations.

Market value (fair value)
The market value (or fair value) is the price that is likely to be achieved within a period of one year under normal conditions and based on the free interplay of supply and demand.

Property-related criteria/risks
These are criteria/risks associated with the property that have nothing to do with the borrower. Examples include the use, usability or development potential of land zoned for construction or, in cases involving investment properties, the conversion, the vacancy risk or a reduction in value (renovation costs, maintenance backlog, depreciation due to age, etc.).

Collateral default risk
The collateral default risk refers to the risk that the proceeds from the realisation of the collateral will not be sufficient to cover the amount owed.

Investment property
Investment properties are properties held for investment purposes and rented out to third parties (not owner-occupied properties). These tend to be residential properties, such as blocks of flats, as well as office and commercial properties or mixed-use properties such as residential properties that include commercial space.

Owner-occupied residential property
Owner-occupied residential property can include condominiums and property that is solely owned or co-owned, or an independent and permanent leasehold property that is inhabited by the borrower himself/herself.