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Level 103

Mortgages Investment Return Taxation


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Mortgagor
Borrower
Mortgagee
Lender
Amount of Mortgage =
Sales Price - Down Payment
LTV Loan to Value
Loan / Sales Price or value of property
Foreclosure
when the mortgage is not paid, the creditor seeks a court-ordered sale of the property
amount of loan (principal)
4 factors needed for amortization
amortization
payment of an obligation in a series of installments or transfers
PIPB
Payment - Interest + Principal ... Balance of Loan
Point
a value equal to 1 percent of loan principal
Loan Origination Fee
2 kinds of points
Mortgage Buydown Points
when builder pays points to lender to reduce the interest rate and monthly payments of the buyer for the first several years.
appreciation
increase in value that can result in a profit, any monetary gain that exceeds costs and expenses.
Capital Gain
an increase in the value of an asset
depreciation
decrease in value of an asset due to obsolescence or use
accrued depreciation
total amount of depreciation that has accumulated over a period of time.
what is capitalization used for
used for estimating the value of income producing rental property of 5 or more units
Capitalization formula
Annual Net Income / Market Value = Cap Rate
what is Gross Rent Multiplier used for
determining the value of income producing 1 to 4 unit rental properties including single family residence
Gross rent Multiplier formula
Sold Price or MV / Monthly Gross Rent = Gross Rent Multiplier
rate of return
r - net return expressed as percentage of original investment
Ad valorem
per value -- RE Taxes are ad valorem because they are based on the property value
Assessed Value
the base value that is used to compute tax
tax formula
Assessed Value / Market Value = Assessment Rate
Mill Tax Rate
1 Mill = $1.00 Tax per $1000 assessed value
Dollar and Cents Tax Rate
X$ per Y$ of assessed property value
1997 Taxpayer Relief Act
$500,000 or $250,000 capital gains tax exclusion for married / single owners of primary residence lived in for at least 2 of the last 5 years
Capital Gains Tax Formula for Other than Principal Residence
Gross Sale Price - Expenses of Sale = Net Sale Price
Capital Gains tax formula for Principal Residence
Sale Price of Old Residence - Expenses of Sale = Amt realized on sale
Seller
who pays costs for settlement date when prorating
Prorated Item Paid
Credit to seller in the amount of the Buyer's share of the cost (ie the buyer refunds the seller for the advance payment)
Prorated item unpaid
Debit to seller so seller gives buyer the amount seller should have paid.
How is unpaid rent handled at settlement
Unpaid rent was seller's obligation to collect; buyer gets credit - treated the same as paid rent. Debit to seller and credit to buyer.
avg length of home ownership
according to govt statistics the avg homeowner moves approx every 7 to 10 years.
save approx 1/4 of 1% for each point paid.
discount points how much interest do you save with one discount point paid?
RAM Reverse Annuity Mortgage
62 years and older borrow equity of the home to supplement retirement income without having to sell their house and move. High initial transaction cost.
15 year vs 30 year mtg
30 year mtg gives more purchasing power to buyer for a given monthly payment.
Real Estate Broker
licensed agent who operates a re business and brings together a seller and a buyer and has obligation to train and supervise re agents working for him
Real Estate Salesperson
Works under the direction of the Broker but is an independent contractor.