Real Estate Finance Unit 4
Study this set o nline at: https://www.cram.co m/flashcards/real-estate-finance-unit-4-
3476 29 9
Purchase, Ref i nance, or Cash out T ypes of l oans i ncl ude conventi onal and
Real estate l oans can be cl assi f i ed i n several ways. One of the most obvi ous ways
government-backed (F H A and VA). Loans are f urther descri bed by occupancy
to cl assi f y l oans i s by thei r purpose—
(resi dence or i nvestment) and by pri ori ty (f i rst or second l oans)
F i xed-rate, ARM , or GPM Lenders cl assi f y l oans by the type of amorti z ati on—
N ontradi ti onal mortgage product Any mortgage product other than a 30-year, f i xed-rate mortgage i s cal l ed a:
A l oan that i s used to purchase property i s cal l ed a ______. Any l oan made at the
ti me of a sal e, as part of the sal e, i s a __________. E ven a second l oan that
Purchase money l oan
f i nances part of the purchase of a property i s a _________. M ost l oans used to
purchase property are cl osed-end l oans
,Real Estate Finance Unit 4
Study this set o nline at: https://www.cram.co m/flashcards/real-estate-finance-unit-4-
3476 29 9
I s one i n whi ch the borrower recei ves al l l oan proceeds i n one l ump sum at the ti me
Cl osed-end l oan of cl osi ng. T he borrower may not draw addi ti onal f unds agai nst the l oan at a l ater
date
Repl aces the ol d l oan wi th a new one. T he l oan amount remai ns the same, but the
Ref i nanci ng
terms change
I nvol ves ref i nanci ng the l oan f or a l arger amount than the current l oan. I f the
Cash-out ref i nanci ng borrower wants cash to make home repai rs, pay f or col l ege tui ti on, pay of f hi gh-
i nterest credi t card debt, or take a vacati on, he or she can get a ___________
Any l oan used to take cash out of a property i s a _______. D raw on the equi ty i n
H ard money l oan property. T hi s type of l oan i ncl udes home equi ty l oans, home equi ty l i nes-of -
credi t, and swi ng l oans
, Real Estate Finance Unit 4
Study this set o nline at: https://www.cram.co m/flashcards/real-estate-finance-unit-4-
3476 29 9
Cash-out ref i nanci ng i s not the same as a home equi ty l oan. Cash-out ref i nanci ng
repl aces an exi sti ng l oan wi th a new one. A home equi ty l oan i s a second l oan
agai nst the equi ty i n your home. E xampl e: H omeowner Pat owes $90,000 on a house
D i f f erences between cash-out ref i nanci ng and home equi ty l oan.
val ued at $180,000 and wants $30,000 to add a f ami l y room. Pat can ref i nance the
l oan f or $120,000, pay of f the exi sti ng l oan, and have $30,000 to add the f ami l y
room
T he i nterest rate and l ength of the l oan hel p determi ne the payment the borrower
wi l l make. T he other determi ni ng f actor i s the ______________. i s the
Amorti z ati on l i qui dati on of a f i nanci al obl i gati on on an i nstal l ment basi s. An amorti z ati on
schedul e detai l s each payment, di spl ays the speci f i c amount appl i ed to i nterest
and pri nci pal , and shows the remai ni ng pri nci pal bal ance af ter each payment.
I s f ul l y repai d at maturi ty by peri odi c reducti on of the pri nci pal . When a l oan i s
f ul l y amorti z ed, the payments the borrower makes are equal over the durati on of
F ul l y amorti z ed l oan
the l oan. Any mortgage other than a 30-year, f ul l y amorti z ed, f i xed-rate mortgage
i s a nontradi ti onal mortgage
H as a repayment schedul e that i s not suf f i ci ent to pay of f the l oan over i ts term.
T hi s type of l oan cal l s f or regul ar, peri odi c payments of pri nci pal and i nterest f or
Parti al l y amorti z ed l oan
a speci f i ed peri od of ti me. At maturi ty, the remai ni ng unpai d pri nci pal bal ance i s
due as a bal l oon payment
Study this set o nline at: https://www.cram.co m/flashcards/real-estate-finance-unit-4-
3476 29 9
Purchase, Ref i nance, or Cash out T ypes of l oans i ncl ude conventi onal and
Real estate l oans can be cl assi f i ed i n several ways. One of the most obvi ous ways
government-backed (F H A and VA). Loans are f urther descri bed by occupancy
to cl assi f y l oans i s by thei r purpose—
(resi dence or i nvestment) and by pri ori ty (f i rst or second l oans)
F i xed-rate, ARM , or GPM Lenders cl assi f y l oans by the type of amorti z ati on—
N ontradi ti onal mortgage product Any mortgage product other than a 30-year, f i xed-rate mortgage i s cal l ed a:
A l oan that i s used to purchase property i s cal l ed a ______. Any l oan made at the
ti me of a sal e, as part of the sal e, i s a __________. E ven a second l oan that
Purchase money l oan
f i nances part of the purchase of a property i s a _________. M ost l oans used to
purchase property are cl osed-end l oans
,Real Estate Finance Unit 4
Study this set o nline at: https://www.cram.co m/flashcards/real-estate-finance-unit-4-
3476 29 9
I s one i n whi ch the borrower recei ves al l l oan proceeds i n one l ump sum at the ti me
Cl osed-end l oan of cl osi ng. T he borrower may not draw addi ti onal f unds agai nst the l oan at a l ater
date
Repl aces the ol d l oan wi th a new one. T he l oan amount remai ns the same, but the
Ref i nanci ng
terms change
I nvol ves ref i nanci ng the l oan f or a l arger amount than the current l oan. I f the
Cash-out ref i nanci ng borrower wants cash to make home repai rs, pay f or col l ege tui ti on, pay of f hi gh-
i nterest credi t card debt, or take a vacati on, he or she can get a ___________
Any l oan used to take cash out of a property i s a _______. D raw on the equi ty i n
H ard money l oan property. T hi s type of l oan i ncl udes home equi ty l oans, home equi ty l i nes-of -
credi t, and swi ng l oans
, Real Estate Finance Unit 4
Study this set o nline at: https://www.cram.co m/flashcards/real-estate-finance-unit-4-
3476 29 9
Cash-out ref i nanci ng i s not the same as a home equi ty l oan. Cash-out ref i nanci ng
repl aces an exi sti ng l oan wi th a new one. A home equi ty l oan i s a second l oan
agai nst the equi ty i n your home. E xampl e: H omeowner Pat owes $90,000 on a house
D i f f erences between cash-out ref i nanci ng and home equi ty l oan.
val ued at $180,000 and wants $30,000 to add a f ami l y room. Pat can ref i nance the
l oan f or $120,000, pay of f the exi sti ng l oan, and have $30,000 to add the f ami l y
room
T he i nterest rate and l ength of the l oan hel p determi ne the payment the borrower
wi l l make. T he other determi ni ng f actor i s the ______________. i s the
Amorti z ati on l i qui dati on of a f i nanci al obl i gati on on an i nstal l ment basi s. An amorti z ati on
schedul e detai l s each payment, di spl ays the speci f i c amount appl i ed to i nterest
and pri nci pal , and shows the remai ni ng pri nci pal bal ance af ter each payment.
I s f ul l y repai d at maturi ty by peri odi c reducti on of the pri nci pal . When a l oan i s
f ul l y amorti z ed, the payments the borrower makes are equal over the durati on of
F ul l y amorti z ed l oan
the l oan. Any mortgage other than a 30-year, f ul l y amorti z ed, f i xed-rate mortgage
i s a nontradi ti onal mortgage
H as a repayment schedul e that i s not suf f i ci ent to pay of f the l oan over i ts term.
T hi s type of l oan cal l s f or regul ar, peri odi c payments of pri nci pal and i nterest f or
Parti al l y amorti z ed l oan
a speci f i ed peri od of ti me. At maturi ty, the remai ni ng unpai d pri nci pal bal ance i s
due as a bal l oon payment
