Ch 10 - Finance Techniques Flashcards Preview

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Flashcards in Ch 10 - Finance Techniques Deck (23)
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1

What type of loan allows the borrower to make periodic payments of interest only for the term of the loan, usually from 1 to 5 years?

Term loan or a straight note

2

What type of loan provides for periodic payments, usually monthly, which include principal and interest?

Fully amortized loan

3

A loan where the repayment schedule calls for a series of amortized payments followed by a balloon payment at maturity

Partially amortized loan

4

The relationship between the amount of money a lender is willing to loan and the lenders estimate of the market value of the property that will serve as security

Loan-to-value ratio

5

Charging a rate of interest in excess of that permitted by law

Usury

6

An added loan fee charged by a lender to make the yield on a lower-than-market-interest VA or FHA loan competitive with higher-interest conventional loans

Discount points

7

A fee in terms of a percentage of the loan about, stated by lender

Origination fee

8

The difference between the properties value and the total debt

Equity

9

Vacant land commands the lowest L/V…

Calling for the largest down payment

10

True or false:

Most acquisition loans are exempt from state usury laws

True

11

True or false:

On a conventional loan, the lender will loan up to 95% of value with private mortgage insurance

True

12

True or false:

Loan-to-value ratios are based on the lenders perception of the risk involved

True

13

True or false:

The rule is that the price or value, which ever is lower, is applied to the L/V ratio

True

14

True or false:

Before the depression, most real estate loans were straight-term mortgages

True

15

True or false:

Straight term loans are generally longer in duration than amortized loans

False

16

True or false:

The fully amortized loan has been the most widely used method of repayment since the 1930s

True

17

Which type of loan is also called a constant or equal payment mortgage?

Fully amortized loan

18

What is the amount of interest in a fully amortized loan computed on?

The principal balance at a fixed rate

19

As the loan matures, the amount applied to the principal ______ each month while the amount of interest _______ until the full amount of principle has been repaid

Increases

Decreases

20

What is the basic rule of economics?

The higher the risk, the lower the L/V. Making a larger down payment will result in a lower L/V

21

What is it called when the value increases in the loan amount decreases?

Equity build up

22

What is the final payment of a loan called?

Balloon payment

23

For the borrower, what is the advantage and disadvantage of a partially advertise loan?

The advantage is that for 10 years the monthly payments will be smaller than if the loan was completely amortized in 10 years.

The disadvantage is that the balloon payment due at the end of the 10th year might be the borrowers financial downfall.