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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


Amortization

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


Compounding

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


Delta

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


Discounting

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


Equity

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


Exponentialcurve (constantratio) change per period

a change on a compound or curvilinear basis


Graduatedpayment 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


Leverage

use of borrowed capital


Loan constant

same as Rm; debt service divided by loan


Mortgage

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


Principal

$ 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


Reversion

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


Stepup (down) annuity

regular & predictable payments that go up or down


Straightline (constantamount) change per period

payments that change @ a certain $ amount over time (constant amount) & the income plots as a straightline


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


Zerocoupon mortgage

a loan that is without debt service, but is paid in a future lump sum
