: Basics of Real Estate Finance Study Questions With Detailed Answers
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Course
: Basics of Real Estate Finance
Institution
: Basics Of Real Estate Finance
: Basics of Real Estate Finance Study Questions With Detailed Answers
"Subject to" Mortgage - Answer-A grantee taking title to a real property "subject to" a mortgage is not personally liable to the mortgagee for payment of the mortgage note.
/.*Note!* - Answer-One other thing that you defini...
"Subject to" Mortgage - Answer-A grantee taking title to a real property "subject to" a
mortgage is not personally liable to the mortgagee for payment of the mortgage note.
/.*Note!* - Answer-One other thing that you definitely need to note is that mortgage loan
interest rates always are quoted on an annual basis. So the interest is a certain percent
a year. In the event that an exam question wants to know the monthly rate all you do is
divide the annual rate by 12.
/.*Notes* - Answer-The term *"hypothecate"* means to pledge property as security for a
debt without giving up possession. *"Amortize"* means to kill off slowly over time.
*"Alienate"* means to transfer title. *"Assign"* means to transfer an interest in a
contract.
/.Acceleration Clause - Answer-A clause in a note that allows the lender to immediately
declare the full principal balance and accrued interest due and payable ("call the loan")
upon the happening of a certain stated event. The most common type of acceleration
clause contained in most mortgage notes allows the lender to call the loan if the
borrower stops making payments in a timely manner, or if the borrower gets behind in
his or her payments by more than a specified time period, such as 30 or 60 days. When
a lender exercises its rights under this clause, if the borrower does not pay the loan in
full, the lender may begin foreclosure proceedings.
/.Acceleration Clause - Answer-A clause in a note that allows the lender to recapture
their investment if the borrower stops making the payments on time
/.Acceleration Clause: - Answer-A provision in a mortgage, deed of trust, promissory
note or contract for deed that, upon the occurrence of a specified event, gives the
lender the right to declare all sums immediately due and payable in full. This event
might be default on an installment payment, destruction of the premises, placing an
encumbrance on the property or the sale of the property.
/.Accrued interest - Answer-Accrued interest is unpaid interest. When interest is payable
in arrears, the interest begins to accrue on the date the loan was made, or if payments
have been made on the interest, on the date to which the interest has been paid, and
will continue to accrue each and every day until it is paid. A note will earn interest until it
is paid in full. Earned interest includes both the paid and unpaid interest for the entire
length of time that the loan has been outstanding.
/.Add-on Interest - Answer-Interest charged on the entire principal amount for the
specified term, regardless of any repayments of principal.
, /.Alienation clause - Answer-A specific type of acceleration clause that is commonly
used in real estate loans is called an alienation clause. An alienation clause is also
known as a due-on-sale-clause. An alienation clause is used when a lender wants to
prevent a future purchaser of the property from being able to assume the loan without
the lender's written consent. An alienation clause provides that when the property is
sold, the lender may either declare the entire debt due immediately or permit the buyer
to assume the loan at an interest rate acceptable to the lender.
/.Amortization Schedule - Answer-A table showing the amounts of principal and interest
due at regular intervals and the unpaid balance of the loan after each payment is made.
/.Amortized Loans - Answer-the word amortize literally means "to kill off slowly, over
time." Most mortgage and deed of trust loans are amortized loans. That is, they are paid
off slowly over time, in equal payments of principal and interest (P & I payments).
Regular periodic payments are made over a term of years. The most common periods
are 15 or 30 years, although 20-year mortgages are also available.
/.Amortized Loans - Answer-The word amortize literally means "to kill off slowly, over
time." Most mortgage and deed of trust loans are amortized loans. That is, they are paid
off slowly over time, in equal payments of principal and interest (P & I payments).
Regular periodic payments are made over a term of years. The most common periods
are 15 or 30 years, although 20-year mortgages are also available. Unlike a straight
note, an amortized loan payment partially pays off both principal and interest.
/.Assignment of Rents - Answer-An agreement between a property owner and a
mortgagee by which the mortgagee receives, as additional security, the right to collect
rents from the mortgagor's tenants in the event the mortgagor defaults under the terms
of the mortgage or promissory note.
/.Assumption of Mortgage - Answer-The act of acquiring title to property that has an
existing mortgage and agreeing to be personally liable for the terms and conditions of
the mortgage, including payments. In effect, the buyer becomes primarily liable for the
amount of any deficiency judgment resulting from a default and foreclosure on the
property. An assumption of a mortgage is essentially a novation.
/.Balloon Payment - Answer-When the periodic payments of principal and interest are
not enough to fully amortize the loan by the time the final payment is due, the final
payment will be larger than the others. This is called a balloon payment. It is a partially
amortized loan because a larger portion of the principal is still owed at the end of the
term. For instance, a lender might make a loan with a term of 5 years, but the payment
amount is based upon a 30-year amortization. At the end of the five year term, a
significant amount of principal will still be unpaid. It is frequently assumed that if
payments are made promptly, the lender will extend the balloon payment for another
limited term. The lender, however, is not legally obligated to grant this extension and
can require payment in full when the note is due.
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