Module 10Buying a home and Mortgage financing

Question 1

Mortgage Financing

Answer 1

Traditional way of borrowing money to buy a home

Question 2

Home Mortgage

Answer 2

Real estate loan with monthly payment that may go up or down according to changes in the interest rate

Question 3

Mortgage

Answer 3

Transfer of interest in a property to a creditor as a security for payments of a debt, after which borrower gains “right of redemption”

Question 4

Right of redemption

Answer 4

Right to reclaim clear title of a home

Question 5

First Mortgage

Answer 5

Original mortgage on a home

Question 6

Second Mortgage

Answer 6

Uses the equity of redemption as a collateral

Question 7

Principal

Answer 7

The amount of money that is being borrowed

Question 8

Amortization

Answer 8

Gradual retirement of a debt by means of a partial payment of the principal at regular intervals

Question 9

Amortization Payment

Answer 9

Time period necessary to completly retire the debt through scheduled repayment of the principal

Question 10

Blended Payment

Answer 10

Payments are leveled payments comprising both interest and principal

Question 11

Term

Answer 11

The actual lenght of time that the money is loaned at a particular rate of interest

Question 12

Maturity date

Answer 12

Final date in the term of the mortgage

Question 13

Conventional mortgage

Answer 13

Loan that does not exceed 75% of the appraised lending value of the property

Question 14

High Ratio Mortgage

Answer 14

Loan that exceeds 75% of the appraised value of the property. Under the national Housing Act, high ratio mortgage must be insured

Question 15

Foreclosure

Answer 15

Remedial court action taken by a mortgagee when the mortgager defaults on the mortgage

Question 16

Power of Sale

Answer 16

Right of a mortgagee to force a sale of a property should default occur

Question 17

Fixed rate mortgage

Answer 17

Offers a fix interest rate for the term of the mortgage. Payments during that period can be increased up to 100% without chenge in the interest rate. After that, mortgage has to be refinanced at rate of interest that applies

Question 18

Closed Variable Interest rate mortgage

Answer 18

Offers a fixed term and allows the mortgager to take adventage of the interest rate fluctuation as it is tied to the prime rate. As interest rate decrease, more of the fixed payment goes toward paying off mortgage principal

Question 19

Open Variable Interest Rate Mortgage

Answer 19

Fixed payment + possible early payments + possible lock in fixed rate at any time

Question 20

No down payment Mortgage

Answer 20

All needed is the money to pay for closing cost

Question 21

Market value of a house

Answer 21

Highest price that a buyer will pay in the open market a seller

Question 22

2 evaluation methods of a house

Answer 22

• Direct market comparaison

- Cost approach

Question 23

Direct Market Comparaison (house valuation)

Answer 23

Bases the price of the home on the prices at which similar properties in the neighbourhood have been sold. Price adjustments are applied subject to spé features of the house

Question 24

Cost approach (house valuation)

Answer 24

For houses with unic features. Bases the price of the home on the cost of the land + cost of reproducing the home - accrued depreciation on the home

Question 25

Reproduction Cast (house valuation/Cost approach)

Answer 25

Cost of exactly reproducing the subject property using identical material at current cost

Question 26

Replacement cost

Answer 26

Cost of reproducing the subject house with a new noe of the same size using current technology material and equipment