05_FixedRateMortgages.pptx

05_FixedRateMortgages.pptx - Fixed Rate Residential...

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Fixed Rate Residential Mortgages Baruch College: RES3200 Set 5 Baruch College: RES3200 1
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RES-3200 2 Baruch College: RES3200 Intro Legal Finance FRM Exam 1 ARM Refi Underwriting Buy vs Lease Exam 2 Commercial RE Pro Forma Underwriting Cap rates Leverage Risk Development Ownership Entity MBS (MPT, CMO) REIT Portfolio Exam 3
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Baruch College: RES3200 3 What is a mortgage? Purchase, Refi, HEL, HELOC, Reverse Who owns mortgages Mortgage Mechanics: LTV, HEQ, Amortization FA-FRM: PMT, Balance, P&I IRR, Fees, Prepayment FRM: Interest Only and Balloon mortgages Fixed Rate Residential Mortgages Roadmap
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Baruch College: RES3200 4 Q: What is a mortgage ? A: any loan using real estate as collateral. (what is collateral?) Mortgages differ in their purpose. Purchase Mortgage : loan used to buy real estate After purchase mortgage, a borrower can replace it (REFI) or get additional liens! Refinance Mortgage (Refi) : loan used to replace a current mortgage. Cash-out Refi: replace a current mortgage with a bigger mortgage Home Equity Loan (HEL) : loan after purchase . (2 nd lien) Ann inherits home from parents w/o mortgage. Ann borrows $30k against home in the form of a HEL to buy a car and to pay tuition. Home Equity Line of Credit (HELOC) : line of credit after purchase. HELOC w/ $5k limit. Borrow $2k. Limit renews to $5k after repaid. Revolving credit : credit limit automatically renewed as debt is paid off Reverse Mortgage : loan repaid when borrower dies or moves out. Fixed Rate Residential Mortgages Mortgage intro
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Baruch College: RES3200 5 Fixed Rate Mortgages 30 year mortgages/ 15 year mortgages/ or other maturities. Interest Only Mortgages Balloon Mortgages Reverse Mortgages Bi-weekly Mortgages Negative Amortization Loans Adjustable Rate Mortgages 1/1 or annually resetting Monthly Libor – loan rate resets monthly Hybrid Mortgages (characteristics of fixed and adjustable) 5/1’s – Fixed for 5 years then annual reset 3/1’s - Fixed for 3 years then annual reset 5/5’s - Fixed for 5 years then reset every 5 years Fixed Rate Residential Mortgages Mortgage Types: Menu We will discuss and analyze these various types of mortgages
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Baruch College: RES3200 6 Wells Fargo rates: 9-13-2016 vs 2-20-2017 APR : the IRR on the loan for the borrower including fees (more later). Fixed Rate Residential Mortgages Current Mortgage Market Rates A jumbo mortgage is a home loan for an amount that exceeds conforming loan limits established by regulation. The jumbo loan limit is $417,000 in most of the United States. The limit on jumbo loans is $625,500 in the highest-cost areas.
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Baruch College: RES3200 7 What is a mortgage?
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