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Real Estate Chapter 5
Terms in this set (53)
Term given to the practice of paying off a mortgage loan faster than required by terms of the mortgage agreement.
Adjustable Rate Mortgage (ARM)
A mortgage loan with the interest rate on the note periodically adjusted based on an index which reflects the cost to the lender of borrowing on the credit markets.
Allows the lender to require the balance of a loan to be paid in full if the collateral is sold (also known as a "due on sale" clause).
The process by which a loan principal decreases over the life of a loan.
The method or manner by which a right or contract is transferred from one person to another.
A mortgage which does not amortize over the term of the note, thus leaving a balance due at maturity.
A type of loan used to fund the purchase of more than one piece of real property. A blanket mortgage is often used for subdivision financing.
A type of short-term loan, typically taken out for a period of 2 weeks to 3 years.
Obtaining a lower interest rate by paying additional points to the lender.
The percentage which is the sum of the discount rate, the effective tax rate and the recapture rate representing the relationship between net operating income and present value. Formula: Value = Income / Rate
A loan secured by real estate which is for the purpose of funding the construction of improvements or building(s) upon the property.
A loan secured by real property through the use of a mortgage note.
The failure to pay back a loan.
A form of pre-paid interest where one point equals one percent of the loan amount.
"Due on Sale" Clause
Allows lender to require the balance of a loan to be paid in full if the collateral is sold (also known as an Alienation Clause).
Backed loans that usually require a lower down payment and may sometimes have a lower interest rate.
A time past the deadline for an obligation during which a late penalty that would have been imposed is waived.
Graduated Payment Mortgage
A type of fixed-rate mortgage in which the payment increases gradually from an initial low base level to a desired, final level.
Home Equity Line of Credit (HELOC)
A line of credit extended to a homeowner that uses the borrower's home as collateral.
Home Equity Loan
A loan secured by equity value in the borrower's property.
The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.
Interest and Tax Deductibility
Reductions of the income subject to tax, for various items, especially expenses incurred to produce income.
Interest Only Loan
only paying interest for a term of the loan. Lenders charge extra fee for this.
Some mortgages have interest rate ceilings (or limits) which are similar to, and sometimes referred to as, lifetime caps.
Loan To Value Ratio (LTV)
A financial term used by lenders to express the ratio of a loan to the value of an asset (property) purchased.
The amount of interest a bank charges on a loan over the base rate.
Mortgage Insurance Premium (MIP)
The amount paid by a mortgagor for mortgage insurance, either to a government agency such as the FHA or to a private mortgage insurance company.
Legal agreement by which a bank lends money in exchange for taking title of the debtor's property, with the condition that the conveyance of title becomes void upon payment of the debt.
The lender or bank who provides a loan to the borrower or homeowner.
The borrower, typically a home owner.
Occurs whenever the loan payment for any period is less than the interest charged over that period so that the outstanding balance of the loan increases. Not legal anymore
A method of financing in which the loan that finances the purchase of a home also finances the purchase of personal items such as a washer and dryer, refrigerators, stove, and other specified appliances.
Pledged Account Mortgage (PAM)
Money is placed in a pledged savings account. This fund, plus earned interest, is used to gradually reduce mortgage payments.
A loan fee equal to one percent of the mortgage amount.
The unfair, deceptive, or fraudulent practices of some lenders during the loan origination process.
Prepayment Penalty Clause
A clause in a mortgage contract that says if the mortgage is prepaid within a certain time period, a penalty will be assessed. The penalty is usually based on percentage of the remaining mortgage balance or a certain number of months worth of interest.
Primary Mortgage Market
The market where borrowers and mortgage originators come together to negotiate terms and effectuate mortgage transaction. Mortgage brokers, mortgage bankers, credit unions and banks are all part of the primary mortgage market.
Private Mortgage Insurance (PMI)
Insurance payable to a lender or trustee for a pool of securities that may be required when taking out a mortgage loan.
A signed document containing a written promise to pay a stated sum to a specified person/institution or the bearer at a specified date or on demand.
Real Estate Settlement Procedures Act (RESPA)
A consumer protection statute, first passed in 1974. The purpose of RESPA are 1) To help consumers become better shoppers for settlement services and 2) To eliminate kickbacks and referral fees that unnecessarily increase the costs of certain settlement services.
The refusal to lend money within a specific area for various reasons. This practice is illegal.
The Truth in Lending Act of 1968 is United States federal law designated to promote the informed use of consumer credit, by requiring disclosures about its terms and cost to standardize the manner in which costs associated with borrowing are calculated and disclosed.
A clause found in a blanket mortgage which gives the owner of the property the privilege of paying off a portion of the mortgage indebtedness, and thus freeing a portion of the property from the mortgage.
Reverse Annuity Mortgage
A form of mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home as satisfaction of mortgage.
A transaction where one sells an asset and leases it back for the long-term; therefore, one continues to be able to use the asset but no longer owns it.
Satisfaction of Mortgage
A document acknowledging the payment of a mortgage debt.
Shared Equity Mortgage
Joint ownership of real estate by both lenders and property dwellers. When the property is eventually sold, the owners share in the proceeds, or equity. In the meantime the property occupants benefit from interest and property tax write-offs.
Secondary Mortgage Market
The market where mortgage loans and servicing rights are bought and sold between mortgage originators, mortgage aggregators (securitizers) and investors. The secondary mortgage market is extremely large and liquid.
State of New York Mortgage Association (SONYMA)
A mortgage program that assists first-time homebuyers with the purchase of a home in New York State.
Straight Mortgage/Term Mortgage
A non-amortizing mortgage under which the principal is paid in its entirety upon the maturity date.
On a loan, claiming a rate of interest greater than that permitted by law.
A mortgage loan designed to offer long-term financing to eligible American veteran or their surviving spouses (provided they do not remarry). The basic intention of the VA direct home loan program is to supply home financing to eligible veterans in areas where private financing is not generally available and to help veterans purchase properties with no down payment.
A form of secondary financing for the purchase of real property. The seller extends to the buyer a junior mortgage which wraps around the existing in addition to any superior mortgages already secured by the property.
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