Podcast
Questions and Answers
Which type of mortgage has an interest rate that fluctuates based on an economic indicator?
Which type of mortgage has an interest rate that fluctuates based on an economic indicator?
- Swing loan
- Share appreciation loan
- Adjustable rate mortgage (correct)
- Fixed rate mortgage
In terms of lender security, which statement is accurate regarding mortgages and deeds of trust?
In terms of lender security, which statement is accurate regarding mortgages and deeds of trust?
- Mortgages and deeds of trust achieve approximately the same objective.
- Deeds of trust provide greater lender security than mortgages. (correct)
- Mortgages provide greater lender security than deeds of trust.
- Mortgages and deeds of trust are used for unrelated purposes.
What is an advantage of a thirty-year loan compared to a twenty-five-year loan?
What is an advantage of a thirty-year loan compared to a twenty-five-year loan?
- Fewer annual payments
- Fewer discount points
- Lower interest rate
- Lower monthly payments (correct)
Which of the following items is not required to be specified on a mortgage note?
Which of the following items is not required to be specified on a mortgage note?
Which type of loan typically features a higher overall cost due to a longer repayment term?
Which type of loan typically features a higher overall cost due to a longer repayment term?
How does an adjustable rate mortgage typically manage the interest rate compared to fixed rate mortgages?
How does an adjustable rate mortgage typically manage the interest rate compared to fixed rate mortgages?
What is a primary characteristic of a fixed rate mortgage?
What is a primary characteristic of a fixed rate mortgage?
What is the term for a provision that allows the lender to declare the entire loan balance due in the event of default?
What is the term for a provision that allows the lender to declare the entire loan balance due in the event of default?
What type of mortgage is known as a junior mortgage?
What type of mortgage is known as a junior mortgage?
Mortgages represent which of the following?
Mortgages represent which of the following?
What instrument serves to document the borrower's promise to repay a loan?
What instrument serves to document the borrower's promise to repay a loan?
What does an acceleration clause allow the lender to do in the case of default?
What does an acceleration clause allow the lender to do in the case of default?
What type of mortgage is considered a junior mortgage?
What type of mortgage is considered a junior mortgage?
What instrument serves as evidence of the borrower's debt and repayment promise?
What instrument serves as evidence of the borrower's debt and repayment promise?
Which term describes a mortgage securing one loan with two or more parcels of land?
Which term describes a mortgage securing one loan with two or more parcels of land?
Flashcards
Adjustable Rate Mortgage (ARM)
Adjustable Rate Mortgage (ARM)
A type of mortgage where the interest rate fluctuates based on an economic indicator. This means the monthly payments can go up or down.
Fixed Rate Mortgage
Fixed Rate Mortgage
A mortgage that has a fixed interest rate for the entire loan term. The monthly payments remain the same.
Mortgage Note
Mortgage Note
A legal document that establishes the borrower's obligation to repay the loan. It typically includes details about the loan amount, interest rate, repayment terms, and any penalties for late payments.
Deed of Trust
Deed of Trust
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Share Appreciation Mortgage (SAM)
Share Appreciation Mortgage (SAM)
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Swing Loan
Swing Loan
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Advantages of a 30-Year Mortgage
Advantages of a 30-Year Mortgage
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Acceleration Clause
Acceleration Clause
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Junior Mortgage
Junior Mortgage
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Promissory Note
Promissory Note
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Blanket Mortgage
Blanket Mortgage
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Wrap-Around Mortgage
Wrap-Around Mortgage
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Purchase-Money Mortgage
Purchase-Money Mortgage
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Construction Loan
Construction Loan
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Defeasible Ownership
Defeasible Ownership
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Study Notes
Mortgage Terms and Concepts
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Acceleration Clause: A provision allowing the lender to demand the full loan balance immediately upon default. This clause is a key feature for protecting lender interests if borrowers default.
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Second Mortgage: A junior mortgage, meaning it holds a lower priority than a first mortgage in case of foreclosure. This signifies the second mortgage holder's position in a potential default scenario.
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Mortgage: A pledge of property as security for a loan, subject to the Statute of Frauds and not a complete transfer of ownership. It's evidence of the debt and promise to repay, distinct from the note. Mortgages are a legal instrument defined by statute.
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Promissory Note: The instrument evidencing the borrower's promise to repay the loan. This document details the conditions and terms of the loan repayment.
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Blanket Mortgage: Secures two or more parcels of land with a single loan. This type of mortgage covers multiple properties with one agreement.
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Wrap-Around Mortgage: Its face amount typically exceeds the amount of loan funds disbursed if there are no loan origination fees or discount points. This type is often complex.
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Adjustable Rate Mortgage (ARM): A mortgage with an interest rate tied to an economic indicator, like the prime rate. Provides flexibility to the lender or borrower but can present risks.
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Fixed Rate Mortgage: A mortgage with a fixed interest rate. This type offers stability and predictability to both parties but can be less attractive when rates are changing rapidly.
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Deed of Trust: In many jurisdictions, achieves similar objectives as a mortgage, in providing lender security, but the legal mechanics/enforcement mechanisms are different. It's an alternative legal mechanism for securing a loan in a property.
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Loan Term (e.g., 30-year vs. 25-year): A longer loan term (e.g., 30 years) usually results in lower monthly payments compared to a shorter term (e.g., 25 years). A critical factor in borrowers' decision-making.
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Mortgage Note Essentials: The note needs to state the debt amount, interest rate, and payment terms; the lender's name is not strictly required on the note itself. The note itself does not require lender's name.
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