Chapter 10 Vocab Flashcards
(19 cards)
ARM
-Adjustable rate mortgage
APR
-The rate of interest on a loan on an annual basis
Asset based loans
-Loans secured by an asset
Cost of funds index
- Often used as a basis for Mortgage interest rates
- Average of the rates paid by savings institutions on deposits
Effective Rate
-The actual rate of interest after all discounting, Fees, and Points have been paid
Coupon rate
- Same as nominal rate
- interest rate stated on the promissory note
- Usually less than the effective rate
Discount Points
-Used to increase the lenders yield without raising the interest rate
Index
-Measure of the coast of money used as the basis of the rate adjustment for an ARM
Equity based loans
-Loans that cover a property owners equity
Points
-1% of loan
Growth Equity Mortgage
- Fixed interest rate
- Payments increase at specific intervals but entire increase is put towards principal
Mortgage payment adjustment period
-Intervals at which a borrowers actual principal and interest payments are changed
Note Rate
-Index rate plus margin
payment shock
dramatic increase in an individual’s debts and liabilities that may cause them to default on their financial obligations.
Revers Mortgage
- Same as Reverse Mortgage Annuity
- Age 62+
- convert their equity into tax free income without selling their home
Shared appreciation mortgage
-Loan made in exchange for a portion of the borrowers equity in the secured assest
Soft money loan
- Credit is extended but cash does not change hands.
- Ex. seller financing
Teaser rate
- A below market interest rate
- Only under specific conditions
Term loan
A term loan is a loan from a bank for a specific amount that has a specified repayment schedule and a fixed or floating interest rate.
