RE Finance Unit 8: Loan Terms & Note Payments Flashcards
Adjusted Book Basis
Purchase price of a property plus any capital improvements minus accrued depreciation, if any, to the date of the sale.
Ammortization
The systematic repayment of a loan through periodic installments of principal and interest over the entire term of the loan agreement.
Balloon Payment
The final payment of a partially amortized loan that is considerably larger than the required periodic payments.
Blanket Mortgage
A mortgage secured by the pledging of more than one property as collateral.
Blends
Interest rate on refinance loans; being an average of the old rate and the new rate.
Boot
In an exchange, something of value given in addition to like-kind property (e.g., “this acre and cash to boot”).
Bridge Loan
An equity loan made for a short time to raise money for a special purpose.
Completion Bond
A third-party guarantee that the builder will complete construction.
Condominium
Fee simple ownership of an apartment or a unit, generally in a multiunit building, plus an undivided interest in the common elements.
Construction Mortgage
Open-end mortgage loan to finance construction of buildings on a property.
Construction/Permanent Loan
Construction loan becomes permanent when building is completed.
Convertible Loan
Borrower can change to a fixed rate any time during the life of an adjustable-rate loan.
Cooperative
A residential multifamily building with the title in a trust or corporation that is owned and operated for the benefit of the persons living therein, each possessing a proprietary lease. All owners have joint liability for the mortgage on the property.
Credit Loan
Mortgage issued strictly upon the financial strength of a borrower without great regard for collateral.
Draws
A system of payments to a contractor under a construction loan.
Exchange
A method for postponing income taxes on capital gains by trading like-kind property.
Hard-Money Mortgage
Cash loan to a borrower.
Installment Sale
Paying for property over time.
Internal Revenue Code Section 1031
Establishes tax rules for the exchange of properties.
Leasehold Mortgages
Mortgage loans secured by the tenant’s leasehold interest in a property.
Lease-Option
A rental agreement including a tenant’s option to purchase the property.
Manufactured Home Loans
Usually issued for single and double-wide mobile homes that are at least 540 square feet, located in approved mobile home parks, are on an approved foundation, and are taxed as real estate, rather than a vehicle.
Mortgage Participation
Condominium, cooperative, and partnership loans.
Open-End Mortgage
A loan providing for future advances.
Option to Buy
A rental agreement including a tenant’s option to purchase the property.
Package Mortgage
A loan that includes certain equipment and appliances located or installed on the premises in addition to the real property itself.
Purchase-Money Mortgage
Loan given by a borrower to the seller as part of the purchase price of the property.
Recognition Clause
Clause included in a blanket loan contract used to purchase a tract of land for subdivision and development; provides for the protection of the rights of buyers of small parcels in case of default on the part of the developer-promoter.
Reverse Annuity Mortgage (RAM)
A system developed for the elderly property owner in which regular monthly payments can be received from a lender. When the total reaches a predesignated amount, the owner then begins repaying the loan or sells the property.
Right of First Refusal
Unlike an option to buy or an option to renew a lease, which stipulates the terms in advance, this approach allows the owner to secure a market price bid that the occupant can be the first to accept or reject.
Sale-Leaseback
Financing arrangement whereby an investor purchases real estate owned and used by a business corporation then leases the property back to the business; may include a buyback option.
Security Agreements
Financing contract for personal property.
Stop Date
Date on a term loan when the balloon payment is due.
Term Loan
Non-amortized loan for a specified period, at the end of which the entire principal amount is due.
Two-Step Mortgage
A hybrid loan between a fixed-rate and adjustable-rate loan; the lower rate remains in effect for seven years and is then automatically adjusted once for the balance of the loan period.
Wraparound Encumbrance
Special form of junior financing instrument designed to encompass an already existing financing instrument.
