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Real Estate Class > Unit 7: Financing > Flashcards

Unit 7: Financing Flashcards

1
Q

Promisory Note

A

Written promise to repay a debt.
Identifies Borrower and Lendor (mortgagor and mortgagee)
The amount of the debt
Terms of repayment and interest

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2
Q

Lien Theory

A

Named after what the Lender holds. In FL, the borrower holds title, but the lender holds a lien on the title. Once Loan is defeated, lien is removed.

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3
Q

Title theory

A

In some states, the lender holds the title till defeasence.

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4
Q

Defeasence

A

The loan is payed off, or defeated.

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5
Q

Assignment of Mortgage

A

The doc used by a lender (mortgagee) to transfer the loan to another company or person. Different from estoppel, which verifies unpaid balance.

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6
Q

Estoppel Cert

A

Given by a lender to an assignee that verifies the current unpaid balance. Different from an Assignment of mortgage, which actually transfers the loan to a different company or person.

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7
Q

Package Loan

A

A contract that pledges real property AND personal property as security for repayment of a debt.

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8
Q

Blanket loan

A

A loan that covers multiple properties, used often by builders. Usually has a release clause for each property, meaning that the each property needs to sell for enough money to cover the release clause amount.

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9
Q

Accelleration

A

The mortgage clause that allows the lender to call the entire balance due in full in the event of defualt by tht mortgagor.
Appears in both Note and Mortgage

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10
Q

Equitable Redemtion

A

The mortgager’s right to cure the default and stop forclosure on their property. Includes all fees and pricipal owed.

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11
Q

Subordination

A

The mortgage clause in which the mortgagee agrees to step down in priority to a subsequent mortgage.

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12
Q

Certificate of Title

A

Mailed 10 days after the cert of sale, conveys the forclosed mortgagor’s interest to the holder of the certificate of sale.

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13
Q

Loan to Value

A

The max amount a lender will lend on a property based on listing price, or appraisal, whichever is lower.

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14
Q

Discount Points

A

Charges by the lender to increase their yield while not increasing the borrower’s rate.
Yeild goes up 1/8 of a percent for Lender
Cost of each point is 1% of the loan
4 points is half a percent of yield
8 points is 1 percent of yield

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15
Q

Equity

A

Current Market Value - Current Debt

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16
Q

Balloon

A

Final lump sum payment that is larger than previous payments. Example of a PARTIALLY AMORTIZED LOAN

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17
Q

PITI

A

Principal, Interest, Taxes, Insurance - Each payment includes pricipal, intersest, 1/12 of the year’s taxes and 1/12 of the year’s insurance.

18
Q

ARM

A

Adjustable Rate Mortgage, Interest rate can fluxuate over the couse of the loan.
May have interest cap or payment cap.
Interest fluxuates, is Linked with recognizable index
Margin remains constant
Index + Margin = rate

19
Q

Underwriting

A

The process by which lenders analyze risk associated with a loan

20
Q

Growing Equity Mortgage

A

A method of debt repayment in which payments gradually increase and the increase is applied to the reduction of principal.

21
Q

The equity redemtion period ends when

A

A cert of sale is issued

22
Q

Due on sale

A

Conventional mortgage clause that allows the lender to accelerate the loan if it is assumed withouth consent.

23
Q

Deficiency Judgement

A

If a property sells for less than the remaining mortgage amount at forclosure auction, the bank may sue for deficiency judgement - the rest of the money.

24
Q

Mortgage

A

A contract that pledges real property as security for repayment of a debt, and provides that the lender may sell the property if the loan is defaulted on.

25
Q

Alienation Clause

A

Restricts the mortgagor from selling the property without paying off the debt, Entitles lender to accelerate loan if it is assumed without consent.

26
Q

Prepayment clause

A

No penalty for paying early

27
Q

Exculpatory Clause

A

Won’t sue for a deficiency Judgment

28
Q

Reasons for Acceleration

A
  1. Default
  2. Non Payment of Taxes (#1 position)
  3. Removal of Improvements
  4. Insurance Coverage Lapse
  5. Waste - really bad condition
  6. Alienation without consent
29
Q

Assumption “Subject to” the mortgage

A
  1. Buyer pays seller and seller is still liable to note.
  2. Novation releases seller who is replaced by buyer.
  3. Major savings are: no loan origination fee or points
30
Q

Mortgagee choices if default

A
  1. Sue on promissory note
    - Judgment levied against mortgagors property
  2. Judicial Forclosure
    - Acceleration plus lawsuit to forclose
    - Upon final judgement the property is sold at auction
31
Q

Forclosure timeline Mortgagee

A

Defaut - Foreclosure suit and mortgage for summarty jugement -summary judgment - Forclosure sale - cert sale issued - 10 days later, cert of title issued.

32
Q

Forclosure timeline Mortgagor

A

Equitable Redemption up until Cert of Sale is issued.

33
Q

Forcloseure process

A
  1. Equitable redemption period, reinstate before sale
  2. Forclosure sale (auction)
  3. Cert of sale to high bidder
  4. 10 days after sale cert title
    Gov liens paid & Cost of forclosure
    Next paid is lender
    Insufficient funds could lead to dificiency judgement
34
Q

Deed in lieu of forcloser

A

Could trade deed directly to bank, decision made together.

Doesn’t wipe out other junior liens

35
Q

Straight term loan

A

360 day year

entire pricipal is paid back at end of loan, Interest also, or can be monthly

36
Q

Fully amortised loan

A

Equal consecutive payments of pricipal and interest
Interest larger in beginning and goes down over time
Balance decreases with each payment and becomes 0 at maturity.

37
Q

Graduated payment mortgage

A

Payments start below fully amortized loan and go up over time.

38
Q

HELOC

A
  • Low interest rate
  • can only draw on what isnt spent
  • Interest is deductible, but only within loan amount limits - 50k single, 100k married
39
Q

Reverse mortgage

A

62+ years
House paid off
bank pays you money each month based on equity
must be paid off upon death or sale of house

40
Q

Conventional Loans

A

Repayment rests solely on the borrower’s ability to repay the loan.
Cheaper because no gov guarantee
Higher down payment = lower LTV ration
Standard: 20% down, 1 parcel, 30 yr

41
Q

Purchase Money Mortgage

A 
Seller financing
Seller holds promissory note and mortgage as part of purchase price
SEller deeds and takes back mortgage
Title transfers and seller holds lien
Grantor is Mortgagee
Grantee is Mortgagor
42
Q

Insured Conventional

A 
Insured by a non governemental agency
PMI 
90% loan
10% DP
PLUS PMI-  protects lender from default

Real Estate Class (12 decks)

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