 Amortized
Loans
Periodic
payments which will include principal
and interest over the term of the loan. |
| |
Fully
Amortized |
| Also Known as a direct
reduction-where the fixed level payments
are made over a specified period or
term. Pays off the entire balance (principal)
of the loan. |
| Partially
Amortized |
| Periodic payments at
fixed rates are not enough to pay off
the entire principal. A large balloon
payment is required at the end of the
loan. (Advantage-Keeps down the monthly
payments) |
| Straight
Term Mortgage |
| Pays off
interest only. At the end of the term,
the principal is paid in full. Usually
short term (3-5 years). non-amortized. |
| Budget
Mortgage |
| Payments
include insurance and taxes as well
as principal and interest. Taxes and
insurance are prorated and placed in
an escrow account. Escrow process is
sometimes referred to as impounds. |
| Graduated-payment
mortgage (GPM) |
| A home
loan that starts out with smaller payments
that gradually increase over the first
few years, then remain fixed. |
| Blanket
mortgage |
| A loan
secured by more than one property. Usually
refers to commercial property. |
| Package
Mortgage |
| Combines
personal and real property in the financing
arrangements (stoves, Refrigerators,
etc.) |
| |
Advantage |
| Can finance personal
property over a longer period of time. |
| Disadvantage |
| you pay much more for
the property than its worth, and personal
property can be depreciated for shorter
periods of time than real property.
|
| Open
End Mortgage |
| Lender
agrees to advance additional funds based
upon equity built up, using the original
mortgage as a security.(It could be
used for improvements or college education,
etc.) |
| Construction
Loan |
| A short-term,
interim loan to pay for building a house.
The lender pays out the money in stages,
called draws, as work progresses. |
| Bridge
loan |
| A loan
that "bridges" the gap between
the purchase of a new home and the sale
of the borrower's current home. The
borrower's current home is used as collateral
and the money is used to close on the
new home before the current home is
sold. Some are structured so they completely
pay off the old home's first mortgage
at the bridge loan's closing, while
others pile the new debt on top of the
old. They usually run for a term of
six months. |
| Adjustable
rate mortgage (ARM's) |
| A mortgage
loan in which the interest rate may
increase or decrease at specified intervals
within limits based on an economic indicator
(usually t-bills) |
| |
Payment
Caps |
| The mortgage can be
protected against the possibility of
payments that they cannot afford. |
| Margin
|
| The percent difference
between the index and the interest rate
charged the borrower. |
| Adjustment
Period |
| Establishes how often
the loan rate may be changed. |
| |
| Permits the mortgagor
to convert from an adjustable rate mortgage
to fixed rate mortgage at certain intervals
during the life of the mortgage. |
| ARM's can
be beneficial to a lender because if
rates increase they are not locked into
a long term fixed low interest loan.
A buyer can save money if the rates
decrease but if rates go up they may
not be able to afford the payments. |
| Growing
Equity Mortgage (GEM) |
| Mortgage
with a fixed interest rate and payments
that increase throughout the term of
the mortgage. |
| Reverse
Annuity Mortgage |
| Lender
would pay owner an annuity (cash Payment)
based on the percentage of the equity
value of the home . Owner is not required
to pay until demise, then paid through
probate. This enables a retired couple
to draw on loan equity of their home
by increasing their loan balance each
month. loan balance would include interest.
|
| Home
Equity Mortgage |
A
loan based upon the equity accumulated
in a home. It can be a source of funds
for a variety of financial needs such
as.
 Financing
the purchase of expensive items.
Consolidating
existing loans on credit card debt
Paying
medical, educational, home improvement
or other expenses. |
