Chapter 8 - Real Estate Finance: Loans Flashcards Preview

2018 California Real Estate Broker Exam > Chapter 8 - Real Estate Finance: Loans > Flashcards

Flashcards in Chapter 8 - Real Estate Finance: Loans Deck (32):
1

promissory note

an IOU, a promise to repay, and the evidence of the debt. It is a negotiable instrument.

2

interest

rent paid for the use of money (capital).

3

usary

charging an interest rate that is in excess of the state established legal limits.

 

ie. a usarious rate

4

simple interest

The interest charged on most real estate loans is ____.

 

-interest paid only on the principal owed

 

5

compound interest

the interest computed on the principal and any unpaid accumulated interest

 

Usually paid in saving account

6

prime rate

the rate charged by commercial banks to their most credit worthy customers.

 

ie. A Paper loans

7

discount rate

the rate charged by the Federal Reserve Bank to the member banks

8

Fact:  Promissory Note

The manner in which the loan is repaid is described in the terms of the promissory note.

 

Some notes are interest only and some aare amortized.

9

interest only loan

straight loan

term loan

A loan that calls for the payment of the interest only until the maturity date when the entire principal is due and payable

10

amortization

the liquidation of a finanacial obligation through regular installments of principal and interest

11

partially amortized installment note

regular, level payments on the principal and interest during the term of the loan.

 

The last installment, called a balloon payment, is much larger than the other payments

12

balloon payment

the last installment on a partially amortized installment note

13

fully amortized note (level payment loan)

a loan with a fixed interest rate and level payments for the life of the loan.

14

biweekly payments

the borrower makes 26 payment (pays 13 months worth) and will pay less interest because the loan term is shortened.

15

adjustable-rate mortgage (ARM)

mortgage in which the interest rate is tied to a movable economic index

16

ARM Term

 

Index

ARM Term

 

Econmic indicator used to calculate interest-rate adjustments

17

ARM Term

 

Qualifying Rage

ARM Term

 

Discounted initial interest rate, often a teaser rate that is below a fully indexed rate.

18

ARM Term

 

Margin

ARM Term

 

Number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment

19

ARM Term

 

Peridic Cap

ARM Term

 

Caps that limit the interest rate increase from one adjustment period to the next

20

ARM Term

 

Lifetime Cap

ARM Term

 

Caps that limit the interest rate increase over the life of the loan

21

ARM Term

 

Payment Cap

CARM Term

 

Caps that limit how much the monthly payment may change, either each time the pament changes or during the life of the mortgage.

 

____ may lead to negative amortization

22

SECURITY INTRUMENTS

 

What are the three common security intruments

SECURITY INTRUMENTS

  1. Deed of Trust
  2. Mortgage
  3. Contract for Deed (Seller Financing)

23

SECURITY INSTRUMENTS

 

Collateral, or security

SECURITY INSTRUMENTS

 

is property pledged or hypothecated by the borrower as security for a loan

24

DEED OF TRUST

 

How many parties are there to a Deed of Trust?

 

What are they?

DEED OF TRUST

 

3

  1. Borrower (Grantor)
  2. Lender (Beneficiary)
  3. neutral third party (Trustee)

25

SECURITY INSTRUMENT - DEED OF TRUST

 

Deed of Trust

SECURITY INSTRUMENT - DEED OF TRUST

 

a security intrument that conveys title of real property from a trustor (borrower) to a trustee (neutral third party) to hold as security for the beneficiary (Lender) for payment of a debt

26

SECURITY INSTRUMENT - MORTGAGE

 

How many parties are there to a Mortgage?

SECURITY INSTRUMENT - MORTGAGE

2

  1. Mortgagor (Borrower)
  2. Mortgagee (Lender)

 

27

SECURITY INSTRUMENT - MORTGAGE

 

What is a mortgage?

SECURITY INSTRUMENT - MORTGAGE

a security intrument that hypotecates the borrower's property as collateral for a promissory note.

28

satisfaction of mortgage

upon final pament and on demand, the mortgagee signs a ____ that the debt is satisfied

29

MORTGAGE

 

Lien Theory State

MORTGAGE

 

States that view a mortgage as merely a lien against the property are called ___

30

MORTGAGE

 

Title Theory State

MORTGAGE

 

Those state that recognize the lender as the owner of the property are called ___

31

MORTGAGE

 

Intermediate Theory States

MORTGAGE

 

the lender can take possession of the mortgaged real estate on default in a ____ Theory state

32