Chapter 5

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Author:
Criwolf
ID:
202747
Filename:
Chapter 5
Updated:
2013-02-24 22:01:10
Tags:
Chapter
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Description:
Financing
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  1. Promissory Note

    +
    1) Mortgage
    2) Trust Deed
    3) Installment Sale Contract (Land Contract)
    used to evidence the basic obligation or debt, the promise to pay back the money.
  2. Mortgage
    • Mortgagor = borrower
    • Mortgagee = lender

    Mortgagor retains full legal title to property
  3. Trust Deed
    • Trustor = Borrower 
    • Trustee = Holder of limited Title
    • Beneficiary = Lender
  4. Installment Sales Contract (Land Contract)
    Vendor = seller = holder of legal title

    vendee = buyer = holder of equitable title

    I.E. Cal_Vet
  5. Straight Note
    Principal payment not made during term of the loan. Involve more interest payment than installment loan.
  6. Amortization 

    A) Fully Amortized
    B) Partially Amortized
    Liquidation of financial obligation on an installment basic.
  7. Balloon Payment
    Partially Amortized

    -Unpaid principal balance due

    -Last Payment
  8. Negative Amortization
    Monthly payment not adequate to cover interest due on loan.
  9. Interest rate will be affect by
    unemployment rate
  10. Negotiable instruments are all of the following except:
    Mortgage
  11. Holder in Due Course
    Innocent 3rd party
  12. Real Estate (home) loan are calculated on:
    Simple interest

    -Interest charged on a decreasing balance
  13. VRM (Vary) or ARM (Adjustable) variable interest:
    rate can be increased or decreased
  14. Nominal Rate
    Interest Rate named in note
  15. Effective rate
    • rate actually paid
    • (Including nominal rate + discount rate)

    discount rate = prepaid interest
  16. Maximum interest rate or Renegotiable rate Mortgage by Federal Law
    5%
  17. Assumption
    Buyer is liable, seller is relieved of any liability
  18. "Subject to..."
    Seller remains liable, buyer accepts no liability. Buyer takes over payment while loan remains in seller's name.
  19. Alienation/due on sale clause
    Not assumable. Permits lender to demand full payment of loan upon transfer of title.

    -no prepayment penalty

    -lender would not likely to enforce when deflation occurs
  20. Acceleration Clause
    unpaid loan principal sum is due.
  21. Subordination Clause
    Lienholder's priority steps back

    benefits trustor

    Allows future loan to have priority.
  22. Or More Clause
    accelerated payoff without prepayment penalty.
  23. Open End Loan
    permits borrower to borrow additional money without rewritting the mortgage.
  24. Seasoned Loan
    record of consistent payments on the loan.
  25. Beneficiary statement
    current unpaid principal balance
  26. Conventional loan
    no government insured
  27. Leverage
    to borrow the maximum as you can to get the loan
  28. Factors influencing real estate market
    • 1) Consumerism
    • 2) Land use control
    • 3) Economic inflation affects outstanding balance of Loan: benefits the trustor(Owner)
  29. If Prices decrease:
    value of money increase
  30. 1 point =
    1/8 yield or 0.25%

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