Real Estate Finance Flashcards
Mortgagor is the…
borrower (typically the person buying the house).
This may seem counter-intuitive. Many students think of the bank as the ‘mortgagor’ since people always say “I’m taking out a mortgage”. But in fact, the homeowner gives the bank a mortgage. A mortgage is really a legal document that allows the lender to foreclose on the property if the borrower defaults on the loan. The borrower gives the mortgage to the lender, and in return for this security, the lender gives the borrower a loan.
Mortgagee is the..
lender or bank who provides a loan to the borrower or homeowner.
This may seem counter-intuitive. Many students think of the bank as the ‘mortgagor’ since people always say “I’m taking out a mortgage”. But in fact, the homeowner gives the bank a mortgage. A mortgage is really a legal document that allows the lender to foreclose on the property if the borrower defaults on the loan. The borrower gives the mortgage to the lender, and in return for this security, the lender gives the borrower a loan.
Fixed-Rate Mortgage / Fully Amortized Loan is the most common type of loan. The borrower makes…
installment payments (usually once a month). Over time the balance on the loan decreases. At the end of the term of the loan (30 years for examples), the loan balance reaches $0 and the loan is paid in full.
In a fixed-rate mortgage, the borrower…
pays both principal and interest with each mortgage payment.
Straight Loan (also known as a Term Loan) is an…
interest-only loan. The balance of the loan always remains the same. At the end of the term of the loan, the borrower must pay the full balance back.
In an Adjustable Rate Mortgage (ARM) loan the …
monthly payment fluctuates based on a standard index. These are considered high-risk loans for borrowers because the monthly payment may increase to an amount the borrower cannot afford.
A blanket mortgage is a type of commercial mortgage in which…
two or more parcels of real estate are pledged as security for payment of the mortgage debt.
A blanket mortgage usually contains a release clause, which allows certain parcels of property to be removed from the mortgage lien when the loan balance is reduced by a certain amount.
A purchase money mortgage is a type of…
seller financing in which a mortgage is given by the buyer to the seller to cover part of the purchase price.
In this type of loan, the seller becomes the mortgagee and the buyer becomes the mortgagor.
A wraparound mortgage is a type of…
seller financing. The seller extends to the buyer a junior mortgage, which wraps around the existing in addition to any superior mortgages already secured by the property.
Swing/Bridge Loan is a type of…
short-term loan, typically taken out for a period of 2 weeks to 3 years.
A bridge loan is a type of gap mortgage in which…
funds are provided over and above an already existing loan until more permanent financing is in place.
A bridge loan allows a buyer to…
obtain a new property without having to sell his/her current property.
In a graduated payment mortgage, the monthly payments are…
lower in the early years of the mortgage term, but increase at specific intervals until the payment amount is sufficient to amortize the loan over the remaining term.
The monthly payments are low in the early years because the borrower does not pay all of the interest that is then added to the principal balance.
A construction mortgage is a form of…
interim, or temporary, short-term financing for creating improvements or buildings on a property.
Negative Amortization occurs when the…
monthly payment is less than full interest and does not pay any principal. The interest that is unpaid accrues and the principal balance owed increases.
