Vocabulary: Flashcards
Income Approach:
appraisal method allowing investors to estimate the value of a property by taking the net operating income of the rent collected and dividing it by the capitalization rate.
Judgement Lien:
created automatically in the country where the judgement was rendered and may be created in other countries by recording an abstract judgement.
Abstract Judgement:
a written summary of a judgment which states how much money the losing defendant owes to the person who won the lawsuit.
Mortgage Points:
a fee equal to one percent of the loan amount.
- discount points.
- origination points.
Market Analysis:
Examination of prices of similar properties sold recently in that particular area. This helps to determine a listing and offering price.
Replacement Cost:
A replacement cost is the cost to replace an asset of a company at the same or equal value, found by depreciation to expense the cost of the asset over its useful life.
Unilateral Contract:
legal enforceable promise, where one party pays the other party to perform a certain duty.
Partition Suit:
A partition of real property by court order or otherwise, to divide up a concurrent (adjoining) estate into separate portions representing the proportionate interests of the owners of property.
Straight Note:
A Promissory Note in which a borrower repays the principal in one lump sum, at maturity, while interest is paid in installments or at maturity.
Leverage:
Purchasing real estate using a small amount of your own money and a large proportion of borrowed funds.
Hypothecate:
Provide title to a property as security for a loan without giving up possession.
Promissory Note:
The basic instrument used to evidence the obligation or debt.
Principal:
Dollar amount of the loan.
Interest:
Rent charged for the use of money
Types of Promissory Notes:
Straight Note (interest only), Installment Note with a Balloon Payment, and Fully Amortized Installment Note (level payment - most common)
Installment Note with a Balloon A Payment (partially amortized note)
A Promissory note with periodic payments of principal and interest and a large payment at the end (maturity date or due date).
Fully Amortized Installment Note (level payment)
A promissory note for which both the principal and interest are paid in equal installments until the debt is paid in full.
Equal Monthly Payments:
Monthly payment amount, including principal and interest, is constant, but as the loan is paid off, the amount of the payment attributed to interest Decreases and the amount attributed to principal Increases.
Acceleration Clause:
Upon the occurence of a specific event, the lender has the right to demand immediate payment of the entire note. (always found in a trust deed)
Alienation Clause:
A form of the acceleration clause, stating that the entire loan becomes due and payable when the property is sold, assigned, transferred, or otherwise alienated.
Subordination Clause:
Part of a trust deed or mortgage that allows for a future change in the priority of financial liens.
Effective Interest Rate:
Rate the borrower is actually paying (including interest, points, and loan fees)
Formula For Calculating Interest:
Principle x Rate x Time
Fixed Interest Rate: (Fully Amortized)
Payments are the same each month for the life of the loan.
Negative Amortization:
The interest rate charges are higher than the monthly payment.
Adjustable Rate Mortgage “ARM” (or Trust Deed)
Loan in which the interest rate fluctuates periodically, based on a specific index, which make the payment amount also change.
Graduated payment mortgage (Trust Deed)
A type of fixed interest rate loan for which the monthly payment starts out lower and then gradually increases.
Points:
An origination fee of 1% of the amount borrowed, charged by the lender.
Equitable Title:
held by the trustor while he/she is repaying a trust deed and note (true ownership).
Legal Title:
“Bare or Naked Legal Title” held by trustee until the terms of a trust deed and note have been fulfilled.
Vendor, Vendee:
Owner selling; Buyer using a land contract
Truth in Lending Act:
Know as Regulation Z, was enacted to protect the consumer by requiring that the lender (creditor) tell the borrower how much he or she is paying for credit. (enforced by the Federal Trade Commission FTC)
