Loan repayment – key terms Flashcards
Payment of debt in regular, periodic installments of principal and interest (as opposed to interest-only payments)
Amortization
A loan that requires scheduled, periodic, level payments that are applied to both the principal and interest sufficient to retire the loan balance at maturity.
Amortized loan – also called fully amortized loan
A lump sum payment that is due at the end of a note term, because the note used paid only part of the principal and or interest.
Balloon payment also called partially amortized mortgage
A loan agreement where payments include principal and interest on the loan, plus 1/12 of the year’s property taxes and hazard insurance premiums (PITI)
Budget loan
The interest rate specified in a promissory note or contract
Contract rate also called note rate, face rate, or nominal rate
The amount of an owners interest in a parcel of real estate which is the fair market value of the real estate in excess of the mortgage indebtedness; calculated as
Value - Outstanding Mortgage = Equity
Equity
A charge a borrower pays to a lender for the use of the lender’s money
Interest
The interest rate that applies if no rate has been agreed to
Legal rate
The use of borrowed money to finance and investment calculating a profit or loss will result not only from the investment but the borrowed money as well
Leverage
An increase in the balance of a loan when payments are not enough to cover the interest
Negative amortization
The amount of a debt excluding interest due
Principal
Interest computed on the principal balance only and not additionally on unpaid interest
Simple interest
A loan where scheduled payments only pay accrued interest, and do not pay any portion of principle, requiring a balloon payment at the end of the loan term
Straight loan
also called interest only loan or term loan
