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REE 3043 Exam 4 questions with verified answers
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REE 3043 Exam 4 questions withverified answers
Document that has the positive and negatives of investing in a property. Used for
regulations ( Reg. ) D Underwritings - ✔✔PPM ( Private Placement
Memorandum )
Periodic payments are sufficient to pay off the full amount of the loan plus all of
the interest by the end of the term.
- was a common type of mortgage until a few years ago. Starting to come back
now. - ✔✔Fully amortizing loan
You pay only the interest on the loan for the entire loan and then pay the
principle at the end of the loan. - ✔✔Interest only loan
Used in commercial loans when a loan amortizes over 25 years but the loan
matures at year 10. ( otherwise the loan payments would be so large that you
couldn't make the payments ) - ✔✔Ballon loan
- If you want to continue owning the
property, you can refinance with the same or another lender or sell the property
, Sometimes banks won't refinance loans because they have made too many loans
on the same type of property ( residential, commercial, etc ) in the area and they
need to decrease their exposure to this type of property. - ✔✔Ballon loan
( unspoken policy of some banks: they will extend their loans and they
will pretend that the value will be there in the future. - ✔✔Extend and
pretend
- they do this because they don't want to have to deal with having to
foreclose on a large number of commercial loans. - ✔✔Extend and pretend
When someone pays back their loan early, they have to pay a penalty. -
✔✔Prepayment penalty
- Since the bank expects you to pay back the loan over the stated term
and have that constant stream of payments.
- banks don't want revenue streams interrupted.
- if you pay loan off in a year 1 you have 5% penalty ( on whatever the principle is
)
- year 2 - 4 % etc. until year 6 where there is no prepayment penalty. -
✔✔Prepayment penalty
Must be 62 years old or older. Home owners need more money to live on so they
use the remaining equity in the house ( a reverse mortgage will typically use 50% of
the equity based on age, health, and life expectancy) and they will send you
payments ( ex. $1,000 a month ). If you have a mortgage then you can use the
money to pay it off. You will get a check for $1,000 and there will be interest on it (
which you do not have to pay ) - once you die or sell the home, your estate will
take the house, sell it, and then they will pay back the bank plus interest that has
accrued. Whatever funds are left over once the bank is paid, goes to the estate.
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