Chapter 23 - Real Estate Finance Options Flashcards
Acceleration Clause
Contract clause giving the lender the right to declare the entire loan balance due immediately because of default, or other reasons stated in the contract
Adjustable Rate Mortgage (ARM)
A type of mortgage structure that permits the lender to periodically change or vary the interest rate charged, based on a standard index.
Alienation Clause
A contract clause that gives the lender certain stated rights when there is a transfer of ownership in property
Amortization
When a loan balance decreases because of periodic installments paid on the principal and interest
Balloon Payment
A final payment at the end of a loan term to pay off the entire remaining balance of principal and interest not covered by payments during the loan term
Construction Loan
A temporary loan used to finance the construction of improvements and building on land.
Conventional Loan
A loan that is not insured or guaranteed by the federal government
Equitable Right of Redemption
The right to redeem the property prior to the sale
Equitable Title
An interest created in property upon the execution of a valid sales contract, whereby actual title will be transferred by deed at a future date (closing). Also the vendee’s (buyers) interest in the property under a land contract
Fixed Rate Loan
A loan where the interest rate remains consistent for the duration of the loan.
Forclosure
When a lien holder causes property to be sold, so that the unpaid debt secured by the lien can be satisfied from the sale proceeds.
Hypothecate
To hypothecate property means that a debtor can pledge property as a security without giving up possession of it.
Judicial Foreclosure
When a borrower is in default the court allows the lender to sell the property to satisfy the debit.
Jumbo Loan
Loans that exceed the maximum loan amount that Fannie Mae/Freddie Mac will buy, which makes them nonconforming
Land Contract
A real estate installment agreement where a buyer makes payment to a seller in exchange for the right to occupy and use property, but no deed or title transfers until all, or a specified portion of, payments have been made
Lease/Option
When a seller leases property to someone for a specific term, with an option to buy the property at a predetermined price during the lease term, usually with a portion of the lease payments applied to the purchase price
Lease/Purchase
When a seller leases property to someone for a specific term, with the tenant agreeing to buy the property at a set price during or following the lease terms
Lis Pendens
A recorded notice that a lawsuit concerning real estate has been filed.
Loan-to-Value Ration (LVR)
The relationship between the unpaid principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property
Mortgage
An instrument that creates a volunatry lien on real property to secure repayment of a debt. The parties to a mortgage are the morgagor (borrower) and the morgagee (lender)
Negative Amortization
The effect when a loan balance grows because of deferred interest when payments are not covering the interest portion of the loan.
Negotiable Instrument
Documents that may be legally transferred from one party to another party by assignment; such as stocks, bonds checks, or freely transferable promissory notes.
Non-Judicial Foreclosure
The creditor is authorized by a power of sale clause in the mortgage or deed of trust to sell the property after proper notice to defaulting borrower but without court supervision. Non-judicial foreclosure is not permitted in illinios
Note Rate
The interest rate stated in a note
Private Mortgage Insurance (PMI)
Insurance offered by private companies to insure a lender against default on a loan by a borrower.
Promissory Note
This is the basic evidence of debt, showing in writing who owes how much to whom.
Security Instrument
An instrument that gives a creditor the right to have the collateral sold to satisfy the debt if the debtor fails to pay according to the terms of the agreement
Short Sale
Strategy to sell foreclosed property at less than the balance owed so that the lender can sell more quickly and get the property off its books
Statutory Right of Redemption
Debtors may redeem the property after the foreclosure sale
Strict Foreclosure
The court establishes a date by which the borrower must pay the balance in full. If the deadline passes, the lender is simply awarded title to the property.
Subordination Agreement
An agreement that gives the mortgage recorded at a later date the right to take priority over an earlier recorded mortgage
Subprime Loan
A loan with higher interest rates and fees to compensate for increased risk of the borrower with a poor credit history
Teaser Rate
A low initial rate on an adjustable rate mortgage. The rate usually returns to normal at the first adjustment date.
Trust Deed (or Deed of Trust)
In Illinois, a deed of trust functions the same as a mortgage
