Mortgages, Deeds Of Trust, & Lending Practices Flashcards Preview

North Carolina Real Estate Licensing Exam > Mortgages, Deeds Of Trust, & Lending Practices > Flashcards

Flashcards in Mortgages, Deeds Of Trust, & Lending Practices Deck (21)
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0

Lender charges points to...?

Increase yield on a loan.

1

Discount Points are paid to the lender to...?

Lower the interest rate on a loan.

2

Each point increases loan yield to lender by...?

1/8%

3

What is Leverage?

Using borrowed money to finance an investment.

4

The higher the LTV...

The higher the leverage

5

The DISADVANTAGE of high leverage is...?

Greater risk of default on the loan.

6

The ADVANTAGE of leverage is...?

Being able to control a large asset with little cash investment.

7

The formula for EQUITY...

Market Value
(-)Total debt today
--------------------------
= EQUITY

8

The formula for the loan-to-value (LTV) ratio aka mortgage ratio is...?

Mortgage Amt

Price or Value


Loan Value is whichever is lower, sales or appraisal price.

9

Acceleration Clause

The lender may demand full payment in case of default.

10

Defeasance Clause

When debt is paid (mortgage/deed of trust), lien must be removed.

11

Due-on-Sale Cause / Alienation Clause

When property is sold, lender may demand immediate payment of entire debt.

12

Power-Of-Sale Clause

Standard in deed of trust - optional in mortgage.

Gives the trustee/mortgagee the power to foreclose w/o going to court (nonjudicial).

13

Short Sales

A

14

Budget Mortgage

Most common.

Payments include debt service and insurance escrow.

PITI

PRINCIPAL & INTEREST = Debt Service
TAXES & SERVICE = Escrow

15

Package Mortgage

Real property ➕ personal property financed.

Example: furnished condo...

16

Blanket Mortgage

Typically used by developers.

More than one parcel pledged as collateral.

17

Partial Release Clause

(Blanket Mortgage)

Allows individual parcels to be released from lien as balance is paid w/o triggering a due on sale clause.

18

Payment for Releases

(Blanket Mortgage)

Not necessarily in equal amounts ( i.e., first property sold will have a larger payment amount, increasing owner's equity.)

19

Construction Mortgage

Interim financing made available in installments (obligatory advances) as improvements completed.

Typically adjustable-rate/short term loans.

Lender may require a commitment for "take out" w/ permanent financing upon completion of the collateral property.

20

Home - Equity Loan

Truth in Lending Act requires all home equity loans to have a 3 business day right of recession.

Borrows against equity in the home.