Terms in this set (5)
Give two reasons a lender might be ill-advised to accept a deed in lieu of foreclosure for a distressed property?
- May be a tax lean on property- takes precedent on mortgage lean
- If borrower declares bankruptcy within one year after foreclosure, lender may loose right of property as collateral for the debt
Why might a real estate investor borrow to help finance an investment even if she could afford to pay 100 percent cash?
- May leave them with leverage to buy more than one property
- Higher return with cash somewhere else, take out mortgage in real estate and take cash and go somewhere else
Various Mortgage Clauses
-comply when you get a mortgage: 1. Property insurance,- because lenders don't want to be stuck with a problem, 2. Pay into an escrow account- pay in advance taxes and insurance, keep in special account so they pay the bill for you, 3. Acceleration- borrower defaults on payments, lender can demand money if you can't pay, 4. Due on sale- property is sold, lender can accelerate the loan (have to pay mortgage off)
Briefly State and Describe four types of Mortgages available to borrowers?
Adjustable- change over time, fixed- can't change overtime, interest only- only pay interest and at the end of a period you will have a ballon pmt and have to pay the remaining amount, jumble- convential mortgage greater than 18,000 (higher rate, HAG rate- covering any lender loss, VA loan- mortgages for veterans
On an adjustable mortgage, do borrowers always prefer smaller (i.e. tighter) rate caps that limit the amount the contract interest rate can increase in any given year or over the life if the loan? Explain why or why not
- Not always prefer because loans with higher capx rate may start off with higher loan rate
- Certain borrowers may say not worth it to them
- May want to start at a lower rate than a rate with a capx
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