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Flashcards in Chapter 1 Deck (28):
1

Mortgage loan

A loan secured by a mortgage or deed of trust that creates a lien against real property; especially, a loan used to purchase real property when that same property serves as security for the loan.

2

Lien

A nonpossessory interest in real property, giving the lienholder the right to foreclose if the owner does not pay a debt owed to the lienholder.

3

Collateral

Property (personal or real) accepted by a lender as security for a loan. The lender has the right to keep or sell the collateral if the borrower fails to repay the loan as agreed.

4

Principal

The original amount of a loan, or the remainder of that amount after part of it has been repaid

5

Interest

A periodic charge that a lender requires a borrower to pay in exchange for the temporary use of the borrowed funds, usually expressed as an annual percentage of the remaining principal balance. Sometimes referred to as the cost of borrowing money or rent on the borrowed money.

6

Investment

When someone (an investor) makes a sum of money (investment capital) available for use by another person or entity, in the expectation that this will generate a return (a profit) for the investor.

7

Investment capital

Accumulated wealth (savings) made available to fund business enterprises or other ventures, projects, or transactions

8

Return on investment

Investor's profit

9

Return of investment / Recapture

recapture of amount originally invested

10

Ownership investment

An investment in which the investor's funds are used to purchase an asset or a property interest in an asset. Ex. Real estate and stocks.

11

Debt investment

Investor provides money to an entity that will eventually repay it. Ex. Loans, bonds, savings account, and CDs.

12

Appreciation

An increase in the value of an asset over time; the opposite of depreciation.

13

Dividend

A share of a company's profits paid to a stockholder as a return on the investment

14

Certificate of Deposit (CD)

A savings arrangement in which a depositor agrees to leave money on deposit for the use of the financial institution for a specified period, or pay a penalty for earlier withdrawal.

15

Securities

Investment instruments that confer an interest or a right to payment, without allowing any direct managerial control over the enterprise invested in. Liquid assets.

16

Stock

A share of a corporation's stock represents a fractional ownership interest in the corporation; a shareholder may receive a return on the investment in the form of dividends and/or appreciation of the share's value.

17

Bond

A certificate of indebtedness issued by a governmental body or a corporation; it will generate a return for the bondholder in the form of periodic payments of interest until the principal is repaid in a lump sum.

18

Mutual fund

A company that invests its capital in a diversified portfolio of securities on behalf of its investors, who own shares in the fund.

19

Liquid investment

An investment that can be quickly and easily converted into cash

20

Yield

The rate of return that an investor receives on an investment, usually stated as an annual percentage of the amount divested. Not necessarily fixed.

21

Portfolio

The mix of investments and cash reserves held by an investor.

22

Diversification

The practice of investing in a variety of different ways and/or in a variety of different sectors of the economy, to make a portfolio safer

23

Interest rate risk

The risk that, after a loan is made for a specified term at a fixed interest rate, market interest rates will rise and the lender will miss the opportunity to invest the loaned funds at a higher rate.

24

Prepayment risk

The risk that a loan will be paid off sooner than expected (often because market interest rates have dropped), reducing the lender's anticipated yield.

25

Market interest rates

The rates that, under current economic conditions, are paid on particular types of investments or charged for particular types of loans.

26

Factors that affect whether someone can afford to buy a home:

Housing prices
Income
Tax considerations
Availability of financing

27

SEC regulates securities trading to protect investors

Financial disclosures required
No insider trading

28

Refinancing

Home owners get new mortgage at lower rate and use proceeds of new mortgage to pay off old mortgage.