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Chapter 13.docx

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FIN 502
Joan Lobo

Chapter 13: Buying a home and mortgage financing Mortgage financing traditional way of borrowing $ to purch home Home mortgages - real estate loan w/ equal monthly pmt - monthly pmt may ↓/↑ according to changes in interest rates - keep paying lender each month for 15-30 years → own home "free and clear" - in interim not keep up w/ monthly pmt → lose home - Mortgage - transfer of interest in property to creditor as security for pmt of debt w/ right of redemption by borrower upon repmt of debt o equity of redemption - title of ownership of home conveyed to bank and have right to reclaim clear title to home upon full repayment of debt o mortgager - homeowner; person who gives the security to obtain loan; not have legal title o mortgagee - lender who re/ title to property until debt fully repaid o first mortgage - where conveyance of title involved retained by mortgager Second Mortgage - second mortgage - using equity redemption as security/collateral for a loan o right to a further equity redemption which can be further mortgaged - third mortgage - second mortgage further mortgaged - borrower retains equity of redemption of last mortgage given Terminology - principle - amt of $ that is being borrowed - interest - price paid by borrower to lender for the use of the lender money - amortization - gradual retirement of debt through partial pmt of principle at regular interval - amortization period - time period req to retire completely a debt through repmts of principle - blended pmt - method of repmt of debt where periodic repmt are constant and each pmt inclu interest and repmt of part of principle - term - actual length of time
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