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types of loans

QuestionAnswer
Amortization is a gradual reduction of a loan debt through periodic installment payments of principal and interest.
A Buy down is obtaining lower interest by paying additional points to the lender. A buy down may be used to qualify a borrower who would otherwise not qualify. This is because a buy down results in lower payments which are easier to qualify for.
Equity is that interest or value remaining in property after payments of all liens or other charges on the property.
HELOC ( Home Equity Line Of Credit) the payments are interest only and the principal amount is due at the end of the loan term
An Adjustable Rate Mortgage (ARM) a mortgage with an interest rate that changes over time in the line with movements in the index. The rate changes. The interest rate is determined by the index plus the mortgage.
balloon mortgage is a partially amortized loan. At the end of the loan term a large payment is made to pay off the loan.
A blanket mortgage covers more than one parcel in a lot and may be negotiated by a developer.
A release clause a provision found in many blanket mortgages, they enable the mortgagor to obtain partial releases of specific parcels from the mortgage upon payment.
growing equity mortgage is also known as a rapid payoff mortgage. when borrowers negotiate a growing equity mortgage they know the monthly payments will increase. (only apply's to the principle thus reducing term of loan.)
graduated payment mortgage also known as a flexible payment plan. Payments start out low then increase,or graduate a certain percentage each year for a specific number of years.
graduated payment mortgage causes a graduated payment mortgage can cause negative amortization. Negative amortization is an increase in the outstanding amount because a monthly payment does not cover the monthly interest due. This is dangerous because debt increases as payments due
open mortgage allows a borrower to pay off the loan before the end of the term. Thus the borrower who negotiated a 30 year fixed rate mortgage can make additional payments and pay the loan off before the 30 year term.
an open end mortgage allows the borrower to secure additional funds under the original loan without redoing the original paperwork.
Construction loan is an example of an open end loan, if a borrower negotiates a construction loan the borrower will receive the money in a series of draws as each stage is being developed.
construction loan (continue) A construction loan is also called a short term loan or an interim loan because the loan is only for the period of construction and is not the end loan.
Takeout loan when construction of the home is finished, you discuss your construction loan thereby transferring it to a mortgage thereby making it a takeout loan.
Package Mortgage both real and personal property. ex: if a furnished condo is purchased is a resort community, the borrower may negotiate a package mortgage covering the condo and the furnishing.
participation loan a loan that requires interest plus a portion of the profits as payment. A loan made or owned by more than one lender; the joint investors share profits and losses in proportion to how much of the loan each owns.
shared appreciation mortgage the lender originates the loan at a below the market rate. In return for a guaranteed share of the appreciation the borrower will realize when the property is sold.
purchase money mortgage any type of financing for the purchase of real estate but usually refers to a transaction in which there is an extension of credit by the seller to the buyer. Also known as a take back mortgage, title passes as closing and the seller takes back a note
reverse mortgage a loan for home owners 62 years of age or older, there are no income or credit rations qualifications in order to qualify for reverse mortgage, and there are no monthly payments made to the lender. loan is repaid when the borrower no longer resides there
reverse mortgage extended if the owner does not have an existing loan on the property they can negotiate a loan an receives a monthly payment guaranteed to them for the rest of there lives as long as they live in the house.
straight note a mortgage where the borrower is required to pay the interest due on the principle mortgage amount during the specified term. the principle loan must be repaid at the end of the term.
Wraparound loan a method of refinancing in which the new mortgage is placed in a secondary, or subordinate, position; the new mortgage includes both the unpaid principle balance of the first mortgage and whatever additional sums are advanced by the lender.
sale lease back there is a simultaneous selling and leasing back of the property. The seller will become the tenant of the new owner.
Created by: Smithhannah236