unit 12 Flashcards
Loan Factors cahrt
simple charts are available to determine monthly payments for a fully amortized loan over varius terms and interest rates. The number shown is the montly paymernt per $1000 of debt
calculate loan factors:
loan amount divide by $1000 = (x)
x times the payment factor for the loan interest rate and terms
circle formula for interest
IRP
I R. P
Interest
rate
purchase price
what is a title theory?
the borrower grants leagal title to a trustee
in a lien theory
the borrower holds both legal and equitable title
the lender has a specific lien on the property as security for the mortgage debt
What is a promissory note?
it is a legal instrument that provides evidence of the debt
What is an acceleration clause?
if the borrower defaults, lender can demand immediate payment of entire balance
what is the mortgage or deed of trust (security instrument)?
instruments that pledge property as security for a debt
mortgage or deed of trust creates a lien when recorded
Acceleration clause
lender may demand full payment in case of defaults
defeasance caluse
when debt is paid lien must be removed
Satisfaction or reconveyance deed
proves payments are in full and are recorded by borrower
Due on sale caluse
also called alienation clause
provides that when the property is sold the lender may demand immediate payment of the outstanding debt
prepayment calsue
establishes terms and conditions for early loan payoff
power of sale clause
optional provision in mortgage if allowed by state law: standard in deeds of trust
What is the Loan to Value ratio?
LTV determines the amount that can be borrowed and if private mortgage insurance will be needed
max percentage of value the lender will loan to the borrower
determined by the sale price or appraised value whichever is lower
What is Leverage?
use of borrowed money to finance a purchase
the higher the LTV the higher the leverage
what are discount points?
one point= 1% of the loan ammount
lender charges points to increase yield on a loan
What is the Loan origination fee?
a cahrge by the lender to process and issue a loan
Foreclosure
is a procedure wherby property used as security for a debt is taken by a creditor/lendor and sold to satisfy the debt
this removes all leins from the property
What is judicial forclosure
lawsuit to obtain the power to foreclose from a court
what is nonjudicial foreclosure?
trustees and mortgagees have the right to foreclose without going to court
deed in lieu of foreclosure
the borrower deeds the property to the lender to avoid foreclosure
this does not remove secondary leins
the lender may not be willing to accept an encumnered title
What is a term straight loan?
interest-only payments until maturity or at end of term
entire principal paid back ina. lump sum balloon payment
partially amortized balloon loan
equal paments of principal and interest
with lump some payment at the end
