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58 Cards in this Set

  • Front
  • Back
Adjustable or variable rate mortgage (ARM or VRM)
a rate where the interest can change
the schedule of principle payments
Annual debt service
the money paid each year on borrowed capital
Annualizer or conversion factor (a)
a factor (e.g. a SFF or1/n) which converts an overall change and makes it a per year %
Annuity payable in advance
regular & predictable payments where the 1st payment is paid @ the beginning or in time 0
Balance outstanding (B)
the principal left to pay on a loan @ a given time; the payoff the loan
Balloon payment
the reversion to the lender; the present value of remaining payments
Capitalization in perpetuity
bringing to value an income stream that has an assumption that it never ends (e.g. income / interest rate)
Cash flow
periodic income from real estate
increasing a payment(s) by giving interest on interest over time
Compound interest
earning interest on interest previously earned
Conversion factor or annualizer (a)
a factor (e.g. a SFF or 1/n) which converts an overall change and makes it a per year %
Convertible mortgage
a mortgage or debt that has a provision that upon certain conditions it may be converted to an equity position
Debt service
$ paid for borrowed capital
symbol for change, usually as a %
Direct reduction mortgage
a self amortizing loan or one with debt service that contains principal & interest
Discounted cash flow (DCF) analysis
a valuation tool that expresses patterned cash flow discounted to a present value (minimum information: income, changes in income, reversion, discount rate); a yiedl capitalization method where anticipated future cash flows are discounted to PV
conversion of income to present value
Effective interest rate
the interest to the lender after accounting for points, certain expenses to the lender and frequency of payment
the portion of a sale price that is not borrowed capital
Equity yield rate (Ye)
overall return to the equity position that accounts for all cash flows to equity measured against down payment; IRR to the equity position
Exponential-curve (constant-ratio) change per period
a change on a compound or curvilinear basis
Graduated-payment mortgage
one that payments are scheduled to increase over time
Hoskold premise
assuming recapture (getting $ back) @ a reinvestment rate other than the required Y on the investment
Income model
a model that brings an income stream to PV
Increasing or decreasing annuity
regular & predictable income that goes up or down
Interest only mortgage
where debt service is equal to the interest owed
Inwood premise
assuming recapture (getting $ back) @ Y on the investment
Lender's yield
the total return to the lender on capital; is = the interest rate with no points & is higher than the interest rate with points paid upfront on a loan
Level annuity
a regular and predictable income stream that does not change
use of borrowed capital
Loan constant
same as Rm; debt service divided by loan
a pledge of real estate for repayment of a loan
Mortgage constant (Rm)
debt service divided by loan
Mortgage yield (Ym)
interest rate on the mortgage
Nominal interest rate
stated interest rate
Ordinary annuity
one payable in arrears or time 1 (not in advance)
Outstanding balance (B)
$ owed on a loan @ a given time
Overall capitalization rate (Ro)
NOI divided by sale price or value, or the rate used to derive value from NOI by dividing into NOI
Overall yield rate (Yo)
the IRR on the total investment measuring value or sale price against all future cash flows
Participation mortgage
one where the lender has some rights in future NOI over and above debt service scheduled
Percentage of the loan paid off (P)
1 minus % of loan outstanding
Periodic (monthly) payment factor
the monthly mortgage constant, or monthly payment divided by loan balance
$ paid towards what is owed on a loan
Proceeds of resale
sale price minus sales's costs
Property model
a model that brings income streams + reversion to PV
Reversion annuity mortgage
one where the borrower gets payments & the lender the right to property @ some future time
a future value; the lump sum benefit received in the future
Shared appreciation mortgage
a loan that contains a provision where the lender can get a portion of appreciation on a property
Sinking fund accumulation factor (Sn)
one of the 6 functions of $1; the factor that shows the future value of $ payments @ a certain interest rate
Six functions of $1
financial functions where n and interest are known & either PV, PMT or FV is given; the 6 functions result in 2 that are PVs, 2 that are PMTs, & 2 that are FVs
Step-up (down) annuity
regular & predictable payments that go up or down
Straight-line (constant-amount) change per period
payments that change @ a certain $ amount over time (constant amount) & the income plots as a straight-line
Terminal capitalization rate (Rn)
the capitalization rate used to derive a future value at the end of a projection period
Variable annuity
regular & predictable cash flows that are not constant over time
Wraparound mortgage
a mortgage that encompasses an existing mortgage(s) where the borrower pays the wrap lender who pays the underlying mortgage(s)
Yield capitalization
processing to value by either discounting or using a rate or multiplier that expresses the income & reversion over time in the derivation of the rate or multiplier
Zero-coupon mortgage
a loan that is without debt service, but is paid in a future lump sum