REE 3043 Chapter Notes - Chapter 9: Conforming Loan, Income Property, Prepayment Of Loan
Document Summary
In a mortgage loan, the borrower always creates 2 documents: a note- details the financial rights and obligations between the borrower and lender. Defines the exact terms and conditions of the loan: a mortgage- pledges the property as security for the debt. Common in commercial real estate loans and home loans. Used in virtually all home equity credit line mortgage loans. Index rate: a market determined interest rate that is the moving part in the adjustable interest rate. Index: us treasury constant maturity rate, thrift institution cost of funds index, libor, home mortgage rate index. Margin: added to the index of the adjustable rate. Determined by the individual lender and can vary with competitive conditions and the riskiness of the loan. Periodic caps- limit change in interest rate from one change date to the next. Overall caps- limit change over the life of the loan (binding for both increase and decrease)
