REFM Prerequisite III
what is a hybrid amortization schedule?
A loan amortization schedule that is not constant throughout the entire loan term (e.g., an amortizing loan with a front-end interest-only period).
what is a draw request?
A periodic request from a construction loan borrower that the lender advance funds (based on project costs incurred for which the borrower has been invoiced or for which they have already paid)
negative amortization loan (accrual construction loan)
A short-term loan provided by a lender for the purpose of new property construction. The principal amounts needed for incurred project costs are borrowed monthly (through a loan draw request) and loan interest accrues (accumulates) and is added to the loan principal balance.
what is an annuity?
A sum of money paid annually or at some other regular interval
what is capitalized interest?
Construction loan interest amounts that are charged but allowed to accrue (accumulate) and be added to the loan principal balance (instead of being paid current each month.)
what is current-pay interest?
Interest payments made monthly.
positive amortization
Occurs when the monthly mortgage payment decreases the loan balance
fully-amortizing loan
a loan whose term and amortization schedule are equal
the debt service is deducted from the...
cash flow
interest payments are paid with _________ while the principal debt service loan will be paid off with _________
cash flows generated from operations; the property sale proceeds
how does an interest-only loan work?
interest is paid on the outstanding principal until the time of the final monthly payment, when the principal balance is also paid
how to calculate the annual payment
multiply the loan principal by the percentage indicated for a given interest rate and amortization period
what does principal mean
the capital amount borrowed
balloon payment
the final payment plus all remaining principal due if the loan matures sooner than the amortization period
the shorter the amortization period...
the greater are the annual payments
the faster the amortization
the lower the total interest payments
mortgage constant
the percentage of the original loan principal amount, that when multiplied by that full principal amount, produces the constant annual loan payment amount inclusive of interest and principal
(what is) amortization
the repayment schedule for the mortgage loan principal
another term for interest-only loan
zero-amortization (bullet) loan
