Mortgage Loan Terms

Question 1

Amortization

Answer 1

Reduction of the balance of the loan by paying back some principal owed on a regular basis. Payments applied to principal and interest (Monthly Payment on a loan).

Question 2

Positive Amortization

Answer 2

Occurs when a portion of each payment is applied to the principal, thereby reducing the outstanding balance ( monthly payment of principal is paid).

Question 3

Negative Amortization

Answer 3

Monthly Payment is not sufficient to cover the accrued interest from previous month (Monthly payment of the principal is not paid).

Question 4

Fully Amortizing Loan

Answer 4

Total Payments over life of loan pay off entire balance of principal and interest due at the end of the term (Self-liquidating).

Question 5

Foreclosure

Answer 5

A proceeding to extinguish all rights, title and interest of the owner of a property in order to sell the property and satisfy any liens against it.

• A Judicial Foreclosure requires court action.
• A Non Judicial Foreclosure does not require court action.

Question 6

Seller Financing

Answer 6

When a seller extends credit to a buyer to finance the purchase of the property.

Question 7

Land Contract

Answer 7

A real estate installment agreement where the buyer makes payments to seller in exchange for right to occupy/use property.
-No deed or title is transferred until all or specified portion of payments have been made.

Question 8

Lease/Option

Answer 8

Property lease for specific term with option to buy at a predetermined price during lease term.

Question 9

Equity Exchanges

Answer 9

Value in one property being traded for value in another property.