Unit 6.3 Quiz: Loan Amortization And Loan Calculations Exam Guide Questions And Answers Graded A+.
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Course
AMORTIZATION
Institution
AMORTIZATION
Which of the following best describes a borrower obtaining a loan where the payment includes principal, interest, taxes and insurance? - correct answer Answer: Budget Loan
Explanation: A lender prefers a budget mortgage as real property taxes have a higher pr...
Unit 6.3 Quiz: Loan Amortization And
Loan Calculations
Which of the following best describes a borrower obtaining a loan where the payment includes
principal, interest, taxes and insurance? - correct answer Answer: Budget Loan
Explanation: A lender prefers a budget mortgage as real property taxes have a higher priority over other
liens and the collateral for the loan is protected when it is insured. A fully amortizing loan means that
the loan will have a zero balance at the end of the loan repayment term. A package loan includes both
real and personal property. A growing equity loan provides for increases in the mortgage payment so
that the borrower is paying down the principal borrowed.
A borrower obtains a 30-year fixed mortgage with a monthly payment of $1,200. All of the following
statements are true regarding financing, EXCEPT: - correct answer Answer:
Additional payments that are made on an amortized loan will result in a reduction in the subsequent
monthly loan payment amounts for the remaining term of the loan.
Explanation: When a borrower makes additional payments on the loan it will reduce the principal
balance and will reduce the number of remaining payments on the loan (decreasing the loan term).
It does not impact the dollar amount of future payments. In other words, if they pay $2000 instead of
the $1200 that is due, they will reduce their loan balance and reduce the NUMBER of payments
remaining, but their next payment (and each other one) will still be due on schedule and still be the
same $1200.
Borrowers in title theory states sign a "deed of trust" which grants legal title to the trustee (with the
borrower keeping equitable title) until the note is completely paid off
A mortgagor refinances their first mortgage, however since the second mortgage is near maturity, elects
to continue to pay the second note as agreed. The new lender wants to be the superior lien over the
second mortgage. What will the second lender do to accomplish this through: - correct answer
Answer: Subordination.
Explanation: Subordination is trading places which allows a lender with a higher priority (older lien) to
change to a lower position.
, Subrogation occurs when a party signs over the right to sue, which occurs when an insurance company
pays a claim and then will seek recovery from the party at fault.
Hypothecation is pledging an asset as security, allowing the borrower to use the property while
payments are made.
Novation of a loan allows a new party to take over a debt through assumption releasing the original
debtor.
The buyer of a new home is acquiring a loan for 90% of the $135,000 purchase price. One lender is
offering the buyer a 15-year conventional mortgage with monthly principal and interest payments of
$1,258. Another lender is offering the buyer a 30-year conventional mortgage with principal and interest
payments of $896. Both mortgages are offered at 6.75% annual interest with a 1% origination fee. What
is the difference in the total amount of interest that would be charged over the life of the two loans? -
correct answer Answer: $96,120
$896 X 12 Months X 30 years=$322,560 total repayment -$121500 loan amount = $201,060 interest
$201,060 (30 year) - $104,940(15 year) = $96,120 difference in interest over the life of the two loans
A property is scheduled for closing on August 20. Which of the following is the best estimate of a seller's
mortgage loan payoff as of the day of closing if they are selling their home for $250,800 and paying off
their 5% annual interest loan which has a principle balance of $215,675? - correct answer
Answer: $216,274.09
Explanation: A seller's loan payoff as of a closing date will always be their outstanding loan balance from
the beginning of the month PLUS any interest that has accrued (built up) since the beginning of the
month.
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