(Lesson 5) Real Estate; Principles (#Unit 15) Flashcards
define mortgage
a mortgage is a voluntary lien on real estate. the person who borrows money to buy a piece of property voluntarily gives the lender the right to take the property if the borrower fails to repay the loan.
define mortgagor
the borrower, pledges the land to the lender, as security for debt.
define hypothecation
hypothecation:
the debtor retains the right of possession and control while the creditor receives an underlying equitable right in the pledged property. This type of pledging is called hypothecation..
**the right to foreclose on the pledged property in the event a borrower defaults is contained in a security agreement, such as a mortgage or deed of trust.
define promissory note
promissory note: (aka the note or financing instrument)
is the borrowers personal promise to repay a debt according to agreed terms.
**when the terms of the note are satisfied the debt Is discharged.. if the terms of the note are not met, the lender may choose to sue to collect on the note or to foreclose.
define a negotiable instrument
a note is a negotiable instrument.. like a check or a bank draft.
Define interest
interest is a charge for the use of money. interest may be due at either the end or the beginning of each payment period.
define usury
charging interest in excess of the maximum rate allowed by law is called usury.
**the overall effect in Illinois is to apply federal usury limits to many if not most residential loans, thereby protecting the consumer.
Define loan origination fee
Loan origination fee: when a mortgage loan is originated, a loan origination fee is charged by most lenders to cover the expenses involved in generation the loan.
define discount points
discount points:
a lender may sell a mortgage to investors…
however the interest rate that a lender charges the borrower for a loan might be less than the yield (true rate of return) an investor demands.
To make up the difference the lender charges the borrower discount points.
define prepayment penalty
prepayment penalty:
IF the borrower repays the loan before the end of the term, the lender collects less than the anticipated interest… For this reason, some mortgage notes contain a prepayment clause, which requires that the borrower pay a prepayment penalty against the unearned portion of interest for any payments made ahead of schedule.
define deed or trust
deed of trust:
lender may prefer to use a three-party instrument called a deed of trust, rather than a mortgage. A deed of trust conveys naked title or bare legal title- that is, title without the right of possession.
define beneficiary in relating to trust/deed for lenders
beneficiary:
the beneficiary is the holder of the note…
**in Illinois a deed of trust is treated like a mortgage and is subject to the same rules including foreclosure.. The truster (borrower) in a deed of trust hold the title to the real estate.
define acceleration clause
acceleration clause:
the mortgage or deed of trust usually includes an acceleration clause… to assist the lender in foreclosure…
If a borrower defaults the lender has the right to “accelerate the maturity of the debt”.. This means the lender may declare the entire debt due and payable immediately..
define satisfaction of mortgage
satisfaction of mortgage:
by the provisions of the defeasance clause in most mortgage documents, the lender is required to execute a satisfaction of mortgage (also called a release of mortgage or mortgage discharge) when the note has been fully paid..
define release deed
the trustee executes and delivers a release deed (also called a deed of reconveyance) to the trustor… the release deed conveys the same rights and powers that the trustee was given under the deed of trust..
