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Agricultural Lending and Borrowing Terms

Acceleration Clause:

A provision in the contract that gives the lender the right to demand repayment of the entire loan balance in the event that the borrower violates one or more clauses in the note.

Accrued Interest:

Interest that is due but not paid back to the lender on the payment date, this amount is then added to the balance owed the lender.

Adjustable Rate Mortgage (ARM):

A mortgage on which the interest rate, after an initial period, can be adjusted by the lender. The rate adjustment interval and the payment adjustment interval are the same on a fully amortizing ARM, but may not be on a negative amortization ARM.


Paying off a debt with a fixed repayment schedule in regular payments

Amortization Schedule:

A complete table of loan payments, showing the amount of principal and the amount of interest that make up each payment so that the loan will be paid off at the end of its term.

Balance Sheet:

A statement of assets and liabilities at a particular point in time


Usually, a short-term fixed-rate loan that involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract. For example, we offer 10-year arm, 30-year amortization with a balloon at 15 years. Meaning the rate is fixed for ten years, then adjusted, based on market, for the remaining five. At which time the fifteen-year mark hits, the remaining balance of the loan is due in full. However, the payments are calculated based on the 30-year term/amortization.

Blended Rate:

A weighted average of interest rates on all debt

Cash Flow:

The total amount of money being transferred into and out of a business, especially as affecting liquidity.

Cash-Out Refinance:

A mortgage refinance that allows borrowers to receive an amount of cash greater than what is required to repay the first mortgage and to refinance other associated loans. Closing costs are included in the cash-out calculation.


An interest in property, owned by another that entitles the holder to a specific limited use or privilege, such as the right to cross or to build adjoining structures on the property.

Fixed Rate Mortgage:

A mortgage on which the interest rate and monthly mortgage payment remain unchanged throughout the term of the mortgage.


Allowing the rate to vary with changes in market conditions.


A party promises to pay a debt or perform an obligation contracted by the original party if the original party fails to pay or perform according to a contract.


Loan-to-value, a comparison of the value of the loan to the value of the collateral


An option exercised by the borrower, at the time of the loan application or later, to “lock in” the rates of the market at that time. The lender and borrower are committed to those terms, regardless of what happens between that point and the closing date.


A written document evidencing the lien on a property taken by a lender as security for the repayment of a loan. The term “mortgage” or “mortgage loan” are used loosely to refer both to the lien and the loan. In most cases, they are defined in two separate documents: a mortgage and a note.


Short for promissory note. This document gives the parameters of the loan and legally obligates the borrower to pay back the debt.


A point is equal to one percent of the principal amount of a mortgage.

Power of Attorney:

An authority by which one person enables another to act on his or her behalf. Power of attorney can be limited to specific areas or be general in some cases.

P&L or Profit and loss

A statement of a business’s gross income, cost of goods, operating costs and net profit or loss.

Pre-Payment Penalty:

A charge the lender imposes if the borrower pays off the loan early.

Settlement costs:

Costs that the borrower must pay at the time of closing. Settlement costs are included on the HUD-1 settlement statement.

Two pack mortgage:

A combination of a first mortgage and a second. Typically, this consists of a line of credit followed by a term loan.

Verification of Deposit (VOD):

A document signed by the borrower’s financial institution verifying the balances of the borrower’s financial accounts.