real estate finance - full book (500 pgs)

The purpose of the secondary market is to shift funds

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Unformatted text preview: / 1200 x 2 = .10 or 10% Dynasty School (www.dynastySchool.com) 7-7 REAL ESTATE FINANCE Example: For how many years is a note with a principal of $1,000 total interest of $360 paid at a rate of 12% annually? T = I / P x R = $360 / $1,000 x .12 = 3 years Example: What is the principal amount of a straight note on which $5,750 of interest has been paid over 5 years at a rate of 11.5%? P = I / R x T = $5750 / .115 x 5 = $10,000 ORIGINATION FEES OR POINTS Most lenders require these initial fees to set up loan accounts. One point equals 1% of the loan amount, a nonrecurring cost (one time charge). IMPOUND ACCOUNT This is a reserve account for taxes and insurance, generally set up by the lender as a convenience for the borrower and a protection against the possibility that a buyer might default on property taxes or neglect to have the property covered by fire insurance. The impound account is considered a trust fund. California law requires impound accounts with banks and savings and loans, on loans secured by one– to four–family residences, to pay interest at the rate of at least 2% simple interest per annum. Under California law (Civil Code Section 2954), no impound account can be required as a condition of a real estate loan on a single–family owner–occupied dwelling except: Where required by state or federal regulatory authority Where the loan is insured or guaranteed by the state or federal government 7-8 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 7: LOAN PAYMENTS & SECONDARY MARKETS Upon failure of the owner to pay two consecutive tax installments prior to the delinquency dates On loans of 90% or more of the sale price or appraised value Whenever the combined principal amount of all loans secured by the property exceeds 80%. DISCOUNT POINTS An additional fee on certain loans is charged by a lender to offset the difference between the loan interest rate and the current discount rate (the percentage subtracted from a loan to increase the profit to a purchaser of the loan), to make the...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.

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