Ch. 13 - Real Estate Finance

Naomi has a home loan amount of $120,000. Her monthly principal and interest payment is $679.00 for thirty years. How much interest will Naomi pay over the term of her loan?

$124,440 extra info: Interest = P&I x 12 = annual payment x # loan years = total P&I; then total P&I - loan amount = total interest paid. So, $679 P&I x 12 = $8,148 annual payment x 30 years = $244,440 total P&I - $120,000 loan amount = $124,440 total interest paid. Jerilyn has been approved for a

Renata has a home loan for $150,000 at 7.5% interest for 30 years and her payment is $987.00 per month (including principal and interest). What is the principal balance after Renata has made one payment on her loan? After two payments?

$149,950.50, $149,900.70 extra info: First determine the annual amount of interest paid based on the loan balance: $150,000 x 7.5% = $11,250 annual interest ÷ 12 months = $937.50 monthly interest. $987 monthly P&I payment - $937.50 monthly interest = $49.50 monthly principal payment. $150,000 original loan - $49.50 first month payment = $149,950.50 after one payment. Use same process with new balance as loan amount to determine balance after second month payment = $149,900.70

Jerilyn has been approved for a home loan in the amount of $250,000 with two points. If one point equals one percent (1%) of the loan balance, what will the points cost Jerilyn? How are the points shown at closing?

$5,000 - The points are shown as a debit to the buyer extra info: $250,000 x 1% = $2,500 per point x 2 points = $5,000 owed by the buyer so it will be shown as a debit to the buyer at closing.

If a conventional loan is at 16% and the VA loan is at 15%, the lender will want to charge how many points to increase the yield on investment?

8 points extra info: The rule of thumb is that 8 discount points are required to increase the percentage yield by 1%, so the lender will want to charge 8 points to increase the yield on investment.

David has been laid off from his job. Carey, his spouse, only works part time and has been trying to pick up extra shifts. They have missed their third home loan payment this month. Their lender has called the entire balance due and payable immediately. Which clause applies to their situation?

Acceleration Clause extra info: An acceleration clause allows the lender to call the entire balance due and payable immediately if the borrower defaults on the loan by missing payments.

Sumatra has had a terrible year. He lost his business and now he has lost his home in foreclosure. The proceeds from the foreclosure sale were not sufficient to cover his debt, and NOW the lender has taken him to court to obtain more money. Which of the following applies to Sumatra's situation?

Deficiency Judgment extra info: If the proceeds from the foreclosure sale are not sufficient to cover the debt, the lender can go to court and seek a deficiency judgment against the borrower that places a general lien against all of the borrower's assets.

Put the following foreclosure actions in order:

Equitable Right of Redemption, Foreclosure, and Statutory Redemption extra info: The equitable right of redemption gives the borrower the right to clear up the debt prior to the foreclosure sale. After the foreclosure sale has taken place, the statutory right of redemption gives the borrower a certain amount of time to clear the debt.

Jonathan is in the process of refinancing his home loan. Due to the lowering of interest rates and Jonathan's credit score improvement, he has been able to secure a conventional loan with an excellent annual percentage rate. Unfortunately, his current loan contract contains a stipulation that if he repays the loan before three years, he will owe the lender a fee of two percent of the loan balance. Which clause applies to Jonathan's situation?

Prepayment Penalty Clause extra info: A prepayment penalty clause allows a lender to charge extra interest if the loan is paid off before the normal completion date.

The Logans are in their seventies with a very nice home. They paid off their mortgage twenty-five years ago. Mrs. Logan has been having serious medical issues and Mr. Logan wants to hire home healthcare professionals to care for her. His retirement savings will not withstand these healthcare costs. He has turned to his home to supplement his monthly income in order to keep his wife at home. Which type of loan applies to the Logan's situation?

Reverse Annuity extra info: With a reverse annuity mortgage, the homeowner receives monthly payments based on accumulated equity rather than a lump sum. This mortgage is available for senior citizens who own their own home with equity.

What are the major differences between a mortgage and a deed of trust?

The number of parties involved and the method of foreclosure on default. extra info: In a mortgage, there are two parties involved while a deed of trust has three involved parties with the trustee holding the legal title and right to foreclose.