Unit 15 - Real Estate Finance Flashcards

Unit 15 - Real Estate Finance Flashcards negative amortizationwhen a payment cap on a mortgage prevents the payment from covering the interest; the unpaid interest is added back to the loan, generating even more interest and debt. If this trend continues, the borrower will make many payments but end up owing more than he or she did at the beginning of the loan bridge loana short-term loan that covers the period between the end of one loan and the beginning of another.satisfaction of mortgageWhen a mortgage is paid in full, the lender will issue a certificate acceleration clausepart of mortgage document that outlines what will happen if the borrower fails to pay the mortgage, maintain the property, or perform any other agreement, stipulation or condition contained in the mortgage.construction mortgagemortgages to finance the construction of improvements to property, such as homes, apartments and office buildings.MIP mortgage insurance premiumAn FHA loan requirement which is a percentage of the loan amount. The borrower can pay this one-time premium at closing or the charge could be financed with the loan."due on sale" clauseform of acceleration clause that requires the borrower to pay off the entire mortgage debt when the property is sold.The due-on-sale clause is also known as an alienation clause, a non-assumption clause, a call clause or a right-to-sell clause.home equity loanOwners have the ability to borrow against the equity they have built up in their home.prepayment penalty clausepart of mortgage document that allows the lender to assess a penalty to the borrower for paying early.mortgagorborrower who gives the mortgage FHA/mortgagehigh loan-to-value ratio loans, so FHA insures the loans in order to make them available to higher risk individuals.release clauseThis clause, found in a blanket mortgage, allows the borrower to obtain a release of any individual lot from the lien by repaying a certain part of the loan. The lender will issue the partial release for the one lot, with the provision that the mortgage will continue to cover the remaining lots.package mortgagea mortgage that includes all the personal property and appliances that are installed on the property. This type of loan has been used extensively in the sale of furnished condominiums.

rate cap; payment capa feature of an ARM to protect borrowers from unlimited increases in the interest rate, adjustable rate mortgagea loan with a variable interest rate mortgageelender who gives the money blanket mortgagecovers more than one piece of property.balloon mortgagea loan that has one large final payment due when the loan matures.buydownthe lump sum payment that is made to the lender at closing usually comes from a builder as an incentive to the buyer or from a family member trying to help out. That payment serves to reduce the interest rate on the loan for the first few years. At the end of that time, the rate rises.pointrepresent prepaid interest, and the lender charges them to get additional income on the loan. They are paid at closing and are equal to 1 percent of the loan amount.pledged account mortgagea type of graduated payment mortgage under which the owner/borrower contributes a sum of money into an account that is pledged to the lender. The account is drawn on during the first three to five years of the loan to supplement the periodic mortgage payments, thereby reducing the borrower's monthly payments in the initial years. Once the account is empty, the borrower makes the full mortgage payment.Straight mortgage/term mortgagealso called an interest-only loan, the monthly payments are allocated only to interest. No principal is paid off. At the end of the term, the borrower must be able to pay off the entire principal amount or get another loan.PMI/private mortgage insuranceinsurance that allows a borrower to get a conventional loan with a lower down payment grace periodan agreed-upon time period after the payment is due in which the borrower can still make the payment and not be considered in default.graduated mortgagethe monthly payment for principal and interest gradually increases by a certain percentage each year for a certain number of years and then it levels off for the remaining term of the mortgage.mortgagea financing instrument that creates a lien against a property.conventional mortgagea non-government backed loan - most common type of loan and is generally viewed as the most secure.marginDifference between the index a lender uses to compute adjustable rate mortgage (ARM) rates and the interest rate the lender actually charges the borrower.shared equity mortgagea form of participation mortgage in which the lender shares in the appreciation of a mortgaged property if and when the

property sells.

sale-and-leasebackThe owner of the real estate sells the property and then leases it back from the buyer. The buyer becomes the owner and the former owner becomes the tenant.reverse annuity mortgagethe lender is making payments to the borrower.amortizationa borrower makes a periodic (usually monthly) payment of principal plus interest. These payments result in the loan being paid off gradually over time.defaultwhen the mortgagor does not pay his mortgage lifetime cap/ceilinga limit to the amount that can be charged in an ARM in a lifetime promissory notea document that describes the amount of money borrowed, the terms under which it will be repaid, and any conditions that relate to either the borrowing of the money or the consequences in event of default.SONYMA/State of New York Mortgage Association provides low interest rate mortgages to low-and-moderate- income families in the State of New York.wrap-around mortgageallows a borrower who has an existing loan to get another loan from a second lender without paying off the first loan.The second lender issues a new larger loan to the borrower at a higher interest rate. The new loan is a combination of the first loan and the second loan.VA/mortgageThe DVA offered an opportunity for veterans to purchase a home with no money down.discount pointspoints alienation clausedue on sale clause