RE Finance

CONSTANT AMORTIZATION MORTGAGE.PAYMENRS ON OCNSTANT AMORTIZATION MORTGAGES R DETERMINED FIRST BY COMPUTING A CONSTANT AMOUNT OF EACH MONTHLY PAYMENT TO BE APLIED TO PRINCIPAL. INTEREST IS THEN COMPUTED ON THE MONTLY LOAN BALANCE AND ADDED TO THE MONTLY AMOUNT OF AMORTIZATION TO DETERMONE THE TOTAL MONTLY PAYMENT

COMSTANT PAYMENT MORTGAGES. THIS PAYMENT PATTERN SIMPLY MEANS THAT A LEVEL OR CONSTANTM MONTHLY PAYMENT IS CALCULATED ON AN ORIGIANL LOAN AMOUNT AT A FIXED RATE OF INTEREST FOR A GIVEN TERM.

LENDERS RECOGNIZED THAT IN A GROWWING ECONOMY, BORROWERS COULD PARTIALLY REPAY THE LOAN OVER TIME, AS APPOSED TO REDUCING THE LOAN BALANCE IN FIXED MONTHLY AMOUNTS

AT THE END OF THE TERM OF THE MORTGAGE LOAN, THE ORIGINAL LOAN AMOUNT OR PRINCIPALIS COMPLETELY REPIAD AND THE LENDER HAS EARNED A FIXED RATE OF INTEREST ON THE MONTLY LOAN BALANCE. HOWEVER THE AMOUNT OF AMORTIZATION VARIES EACH MONTH

IS RATE AT WHCIH THE PROCESS OF THE LOAN REPAYMENT OCCURS OVER THE LOAN LTERM.

FULLY PARTICALLY, ZERO, NEGATIVE AND CONSTANT RATES OF AMORTIZATION

THE REASON FOR SUCH A HIGH INTEREST COMPONENT IN EACH MNTHLY PAYMWNT IS THAT THE LENDER EARNS AN ANUAL PERCENTAGE RETURN ON THE OUTSTANDING MONTHLY LOAN BALANCE. BECASUE THE LOAN IS BEING REPAID OVE A LONG PERIOD OF TIME, THE LOAN BALANCE IS REDUCED ONLY VERY SLIGHTLY AT FIRST AND MONTHLY INTEREST CHARGES R CORRESPNDINGLY HIGH

R INCURRED IN AMNY TYPES OF RELA ESTATE FINANCING , INCLUDING REISDENCIAL PROPERTY, INCOME PROPERTY, CONSTRUCTION AND LAND DEVELOPMENT LOANS.

CLOSING COST THAT DO AFFECT THE COST OF BORRWING ARE ADDITIONAL FINANCE CHARGES LEVIED BY THE LENDER. THESE CHARGES CONSTITUTE ADDITIONAL INCOME TO THE LENDER AND AS A RESULT MUST BE INCLUEDD AS A PART OF THE COST BORROWING. LENDER REFER TO THESE ADDITIONAL CHARGES AS LOAN FEES.

NO, THE TRUE INTEREST RATE ALWAYS EQUALS THE CONTRACT RATE OF INTEREST

LENDERS USUALLY CHARGE THESE COST TO BORROWERS WEHN THE LOAN IS MADE OR CLOSED RATHER THAN CHARGING HIGHER INTEREST RATES.THEY DO THIS BECASUE IF THE LAON IS REPAID SOON AFTER CLOSING, THE ADDITIONAL INTEREST EARNED BY THE LENDER AS OF THE REPAYMENT DATE MAY NOT BE ENOUGH TO OFFSET THE FIXED COSTS OF LOAN ORIGINATION

TRUTH IN LENDING ACT THE LENDER MUST DISCLOSE TO THE BORROWER TEH ANNUAL PERCENTAGE RATE BEING CHARGED ON THE LOAN . THE APR REFLECTS ORIGNIATION FEES AND DISCOUNT POINTS AND TREATS HEM AS ADDITIONAL INCOME OR YIELD TO THE LENDER REGARLESS OF WHAT COSTS THE FEES ARE INTENDED TO COVER. THEAPR IS ALWSYAS CALCULATED ASSUMING THAT THE LOAN IS REPAID AT MATURITY

The differrs from teh contract rate becasue it included financing fees(points, origination). it deffers from th apr because the LATTER IS CALCULATED ASSUMING THAT THE LOAN IS REPAID AT MATURITY. WHEN CALCUALTING THE EFFECTUVE COST, THE EXPECTED REPYAMENT OF PAYOFF DATE MUST BE USED. THE LATER IS USUALLY SOONER THE MATURITY DATE.

This rate is usually quoted as an annual rate, however the time intervals used to acrue interst is generall not quoted explicity. further, the rate generally does not specify the extent of any origiantion fees and or discount points

The accrual rate is usually the nominal rate divided by the number of periods within a year that will be used to calculate interest. For example, if interest is to be accrued monthly, the nominal rate is divided by 12; if daily, the nominal rate is divided by 365. The payment rate, or “pay rate”, is the % of the loan to be paid at time intervals specified in the loan agreement. This rate is used to calculate payments which are usually made monthly (but could be quarterly, semi-annual, etc.) If the pay rate exceeds the accrual rate, this indicates that some loan repayment (amortization) is occurring. When it is equal to the accrual rate, amortization is not occurring, etc.