FINA 210 Lecture Notes - Lecture 5: Financial Institution, Effective Interest Rate, Interest Expense
Document Summary
Without a minimum down payment, you cannot be involved in real estate investment. Borrow money against a property mortgage loan. 99% of real estate investment requires other people"s money financing this environment requires leverage. Leverage: using a bank loan or other people"s money. Bank lends you money up to a certain percentage of the value of the property. They calculate this by using the loan to value ratio. Loan to value ratio: maximum percentage of the value of the property that the bank will lend you. Mortgage issued by bank or financial institution (term, interest rate, amount of payment) The financing environment: the financing environment exists when a buyer does not have sufficient cash to purchase the property in question; he resorts to his bank to obtain a mortgage to cover the portion that is missing. Mortgage is the term used for a loan on a real estate transaction. It may also go under the name loan-to-value ratio.
