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GLOSSARY
Short refinance
Short refinance is the replacement of a mortgage, usually with a smaller mortgage, when the borrower is already in default. This is done to transition the borrower to a more affordable payment structure. The lender has to write off the difference between the old mortgage and the new mortgage, but this may be preferable to foreclosure.
Short sale
A short sale is an investing strategy that involves the sale of securities that are borrowed and not owned. The seller agrees to the transaction with the expectation that the security will go down in price; when the decline occurs, the seller can purchase the security on the open market at a lower price than the amount generated by the short sale.
Short tax year
Short tax year is the term for a tax period that's less than on year. This only pertains to businesses, and can result from the midyear inception of a business or a change in the business's fiscal year-end date.
Short-term
Short-term describes something that has a brief duration. In accounting, short-term usually means 12 months or less. Short-term debt, for example, is an obligation that's due and payable within one year.
Short-term bond fund
Short-term bond fund is a mutual fund that invests in debt securities that mature in five years or less.
Short-term capital gain or loss
Short-term capital gain or loss is the amount earned or lost on an asset that was sold after being held for less than 12 months. Short-term capital gains have a less favorable tax impact than long-term capital gains (which result from the sale of assets held longer than 12 months).
Sight letter of credit
Sight letter of credit, or sight L/C, is a document used in international trade that's payable to the holder if presented with certain supporting documentation. Sight L/Cs are different from traditional L/Cs in that the traditional L/C guarantees payment, but is not immediately payable.
Signature loan
Signature loan is another name for an unsecured personal loan. This type of loan is made on the strength of the borrower's credit rating and history, and no collateral is pledged. Banks may offer signature loans to their wealthy, long-standing customers.
Silent second mortgage
A silent second mortgage is a secondary real estate loan that's not disclosed to the primary lender. Since both a first and second mortgage lender take a security interest in the home, each lender should be notified of the other lender's existence. Not doing so is usually fraud, particularly if the second mortgage is used to fund the down payment that the first mortgage lender requires.
SIMPLE
SIMPLE is an acronym for Savings Incentive Match Plan for Employees, which is a type of retirement plan established by employers with a relatively small number of employees. SIMPLE plans can either be IRAs or 401(k)s. Employers can make tax-deductible contributions to employees' accounts, either as a matching contribution, or a flat non-elective contribution.
Simple interest
Interest computed only on the principal balance, without compounding.
Simple interest bi-weekly mortgage
A simple interest bi-weekly mortgage is a real estate loan that's structured with a payment due every two weeks. These payments are applied to the principal balance as soon as they're received. Because the payments are applied immediately, rather than being held and applied once monthly, the borrower realizes reduced interest costs over time.
Simple interest loan
The interest accruing on the unpaid principal amount, excluding the compounding interest of total amount due.
SIMPLE IRA
A SIMPLE IRA is a tax-advantaged retirement savings plan established by an employer for the benefit of employees. SIMPLE IRAs can be set up by employers that have 100 or fewer employees, and tax-deductible contributions can be made by employees and the employer.
Simple-interest mortgage
A simple-interest mortgage is a real estate property loan that accrues interest daily rather than monthly. The daily interest rate is calculated by dividing the stated interest rate by 365 days; the resulting percentage is then applied to the outstanding balance. A simple-interest mortgage will result in higher total interest costs relative to a traditional mortgage. This is because traditional mortgages accrue interest based on 12, 30-day months, which equates to 360 versus 365 days.