REE-3043 Lecture Notes - Lecture 17: Balloon Payment Mortgage, Loan, Life Insurance
16 Nov 2017
School
Course
Professor
Document Summary
Commercial mortgage market characteristics: the primary market is dominated by commercial banks and life insurance companies. In recent years, the size of the cmbss market has grown dramatically: commercial mortgages are typically 5- to 10- years, and often include a balloon payment, commercial mortgages are often nonrecourse loans. Common types of permanent mortgages: balloon mortgages, common loan provisions, lock-out, prepayment, and yield maintenance provisions, floating rate loans. Permanent mortgages with equity participation: participation mortgages. The borrower"s decision making process: two basic reasons real estate investors use borrowed funds, to increase the size of their purchase (affordability), and, to magnify their expected rate of return (leverage, positive and negative leverage. Increased variability of returns: effect on before- and after-tax cash flows, effect on before- and after-tax equity reversion. The loan submission package: loan application, property description and legal aspects, cash flow estimates, appraisal report and feasibility study.
