Real estate Financing Flashcards
Portfolio Loans
loans that a bank keeps and services in house
Secondary Mortgage Market
where banks sell loans to investors
Mortgagor forwards future mortgage payments to new owner
-mortgagor doesnt need to consent to the sale of their loan
Helping Familie Save Their Homes Act
Certificate of no defense/Estoppel certificate
all the terms of the loan remain the same with the new servicer
Fully Amortized Loans Vocab
- Amortization= payment or debt in equal payments over loan term
- Debt Service = payment of both principal and interest
- Principal = amount borrowed (debt)
Fully Amortized Loans
loans that are completely paid off when last payment is made
- also known as Direct Reduction Loans
- Debt service pays both principal and interest
PITI Payment
Principal Interest Taxes and Insurance (Home Owners Insurance)
How do fully amortized loans work?
Every month a portion goes to principal and interest but the payment remains the same
Amount going toward principal & interest changes over the life of the loan
- recalculated monthly
- only 12 days in a calender year for calculation
With each payment made, amount of money going toward principal increases, while the amount going toward increase decreases
Final Payoff = discharge document that shows that the lender has no claims to the collaterl for the debt because it was paid in full
Principal payments are always residual
Difference between total payment & interest due
Math using the amortization table
Formula: (loan amount/1000) x PI = monthly payment
to calculate the payments on an amortized loan the formula is the first half of PITI. payments on a $200,000 loan at 5% interests amortized over 30 years would have a PI of $5.37 and be calculated as (200,000/1000)*5.37PI = $1,074
the payments of Principle, Interest, Taxes, and Insurance
a loan can either be a fixed rate or adjustable rate
fixed rate
interest rate doesn’t change over the life of the loan
Adjustable Rate
Interest rate is usually lower in the beginning
- Teaser or discounted rate
* Interest rate adjusts based on prime rate
* payment caps
- if increase is higher than cap, bank will carry it over to next rate increase
Balloon Loans
- Amortization period is longer than pay period
- Balloon = unpaid principal at the end of the term
Straight & Simple Interest Loans
- interest only loans
- non compounding debt calculated daily
- Principal paid in one lump sum at the end of term
Second Mortgages
Junior Liens
* Equity Line, Line of Credit
* Borrower is given a line of credit against their equity
Graduated Payment Loans
Doctor loans
- Monthly payment is lower in the beginning and increases as the homeowner makes more money
- Used for homebuyers with predictably rising incomes (doctors)
- Negative amortization of interest
^not paying in interest it gets added on to loan
Growing Equity Mortgage
- Extra payments are made toward the principal
- Homeowner will pay off the loan faster
(Payments increase over life of loan as a predetermined schedule)
Reverse Annuity Mortgage
- Bank makes payment to the homeowner against the equity in their home
- must be 62 y/o to use
- Loan plus interest must be repaid when home is sold or they pass
Loan must be paid off wihin 12 months of homeowner death
Purchase Money Mortgage
- Seller= Mortgagee, Borrower= Mortgagor
- Seller acts the bank or lender
- Buyer gives the seller a note and a mortgage
Wraparound Mortgage
Seller financing
- Seller “wraps” their existing debt around the borrower new loan
- Helps seller pay off their existing debt while making extra money from seller financing arrangement
Construction Loans
- Borrower recieves funds in draws (on stages of construction)
- Loan typically gets replaced once construction is complete
Usually replaced by a take out loan
Package Mortgage
Covers real and personal property
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