the most common instrument used to finance the acquisition of existing commercial property is.......
what is par value?
the remaining loan balance on residential mortgages
what is a lockout provision?
prohibits prepayment of the mortgage for a period of time after its origination.
what are prepayment penalties?
expressed as a percentage of the remaining loan balance. these can significantly increase the cost of refinancing and therefore reduce the benefits.
yield maintainence agreement?
the penalty that borrowers pay depend on how far interest has fallen since origination.
what is defeasance?
a borrower who prepays must purchase for the lender of us treasury securities whose coupon payments replicate the cash flows the lender will lose as a resultof the early retirement of the mortgage.
floating rate mortgage
usually based on the prime rate
seller allows buyer to pay the purchase price over a number of years, what this does is it allows the seller to collect a down payment and loans the remainder of the purchase price to the buyer
lender receives a portion of cash flow from operation or sale of property.or both as well as scheduled mortgage payments. lender does this buy acquiring ownership in property
borrower either currently owns or purchases the buildings and other improvements. The other party purchases the land and leases it back to the borrower. Usually the investor also provides the long term mortgage for the building if land and structure are to be acquired.
secured by the borrowers pledge of the property as collateral, but the second mortgage is subordinate to the primary mortgage in the event of foreclosure.
similar to second mortgages except the fact that these loans are not secured by a lien on the property. they are secured by the equity interest in the borrowers company.
the risk that NOI (net operationg income) will be less than debt service is called.....
business relationship in which a permanent lender agrees to purchase loans or to consider loan requests froma mortgage broker or banker
each commercial proerty type represents an investment in a diverse business with different operating margins, regulatory constarints, and supply and demand fundamentals.
local markets have an effect on how properties perform. for this reason, lenders often perform the same kinds of market and feasibility analyses undertaken by investors and appraisers.
tenants typically fufill their lease obligations as long as their business is profitable. lenders are therefore concerned about the number of tenants in each property and their creditworthiness.
cash flow from property operations is derived from leases. Therefore, lenders must evaluate important lease terms such as base rental rates, escalation clauses, expense payment provisions, and renewal and cancellation options
can affect the operating performance of a property. thus, lenders must evaluate the managers experience and knowledge of the local market
the age design and physical appearance of the building can dramatically affect its income producing ability. In particular, lenders should be concerned about any deferred maintainence or required capital expenditures that may affect the ability of the borrower to service the debt
these have become more and more important
although they have to worry about land issues, borrower quality is also very important
a check to make sure the potential borrower has not misrepresented in any way
written agreement commits lender give loan to borrower as long as borrower follows terms and conditions
rate lock agreement
protects against contract interest rate increases
land acquisition loans
finance purchase of raw land
land development loans
finance installation of of on site and off site improvements to land.
used to finance costs associated with erecting the building or buildings
a single short term permanent mortgage
pool money from multiple investors
invest in and operate in commercial properties
purchase mortgage obligation and effectivelt become mortgage lenders
combination of both properties and mortgages
reits are corps and thus receive the same protection as