financing Flashcards
What is the primary focus of Module 4 in Development Financing?
The critical resource of Financing in Property Development
What is generally needed to finance a development project?
A large portion of capital
What is the concept of Financing in development?
You need this much money to do this thing based on these details
What are Capital Costs?
The costs needed to bring a project to a commercially operable status, including:
* Purchase of the Land
* Permits and Legal Costs
* Construction Costs
* Financing Costs
* Capital Assets
What does LTV stand for in financing?
Loan-to-Value percentage
What factors influence different lending terms offered by lenders?
Developments risk profile and percentage of personal investment
What are the basic terms common to Personal Mortgages and Development Financing?
Amortization, Annual Percentage Rate, Interest Rate, Down Payment, Principal, Equity, Mortgage Insurance, Closing Costs, Loan to Value Percentage
What does Amortization refer to in mortgage payments?
The reduction of the loan balance with each mortgage payment
What is the Amortization Period?
The time over which the mortgage is to be completely repaid
What is a Mortgage Term?
The length of time committed to a mortgage rate, lender, and conditions
What does the Annual Percentage Rate (APR) represent?
The true cost of your loan, including interest rate plus fees and other costs
What is the difference between Interest Rate and APR?
Interest Rate is the cost to borrow money; APR includes additional fees
What is a Down Payment?
The amount of money put towards the total purchase price, deducted from it
What is Principal in the context of a mortgage?
The amount you borrowed
What is Equity in real estate?
The difference between what you owe on your mortgage and the market value of the property
What does a 65% LTV mortgage indicate?
The lender will advance as much as 65% of the appraised value of the property
What is Mortgage Insurance?
Insurance mandatory for buyers with less than a 20% down payment, protecting lenders against loss
What are Closing Costs?
Legal and administrative costs needed to be paid when closing a deal
What is a real estate appraisal?
The process of developing an opinion of value for real property, usually market value
What is the Gross Debt Service Ratio (GDS)?
The ratio that should not exceed 39% of your gross household monthly income for housing costs
What is the Total Debt Service Ratio (TDS)?
The ratio that should not exceed 44% of your gross monthly income including total debt load
What is a High-Ratio Mortgage?
Any mortgage with less than a 20% down payment requiring mortgage default insurance
What is a Conventional Mortgage?
A mortgage without any high-ratio or lender insurance premium, with down payments of 20% or more
What types of loans are included in Development Affordability?
- Land Acquisition Loans
- Site Development Loans
- Building Construction Loans
What is meant by ‘Skin-in-the-game’ in development financing?
The amount of personal capital you have to invest in a project
What is a key factor in the approval of loans such as construction loans?
The amount of Personal Capital or ‘Skin-in-the-game’ you have to invest
This indicates the borrower’s financial commitment to the project, which can significantly influence loan approval.
What percentage of land value may be required from a borrower for a Site Development or Land Acquisition Loan?
Up to 50%
This percentage may vary depending on the lender, particularly for private lenders.
What additional documents are required for Building Construction Loans?
- The mortgage application
- Drawings and Plans
- Budgets (Itemized)
- Construction Timelines
- An Overall Construction Plan
These documents help lenders assess the feasibility and planning of the construction project.
What is the purpose of a development feasibility analysis?
To include all necessary information for loan approval and project viability
This analysis is crucial for understanding whether a development project is financially sound and viable.
What is the focus of the course mentioned in the text?
Developing a feasibility analysis for development financing
The course aims to equip learners with the skills to analyze and create feasibility studies for financing projects.
What is the first assignment related to Development Financing?
Complete Module 4 – Development Financing - Assignment 1
This includes reading the assignment thoroughly and uploading it as per the instructions.
Fill in the blank: The mortgage application may include _______.
[personal net worth statements]
Personal net worth statements help lenders evaluate the borrower’s financial stability.
True or False: Construction loans only require financial documentation.
False
In addition to financial documents, construction loans require various planning and project management documents.
