An additional principal payment is a voluntary payment in addition to the established payment amount, applied directly against the loan principal. It helps in shortening the length of the loan term and reducing overall interest costs.
Amortization is the process of gradually paying off a debt over time through regular payments, which include both principal and interest. This structured repayment schedule is commonly used in loans such as mortgages, car loans, and personal loans.
Amortization refers to the process of paying off debt over a specific period of time through regular payments of principal and interest, ultimately resulting in the full repayment of the loan by the end of the term.
Amortization of Deferred Charges refers to the procedure that allocates the cost of intangible assets to accounting periods, similar to how depreciation handles tangible assets. This concept is especially relevant for costs incurred to arrange loans and leases, which are typically written off over the term of the agreement.
A balloon mortgage is a type of loan that does not fully amortize over its term, leaving a balance due at the end of the period in a balloon payment. This large, lump-sum payment can be a surprise for borrowers who are not prepared or aware of this structure.
A biweekly loan is a mortgage that requires principal and interest payments at two-week intervals, leading to faster amortization and potentially significant interest savings compared to traditional monthly payments.
Cash equivalent in real estate refers to converting the price of a property sold with either favorable or unfavorable financing into the price the property would have sold for if the seller had accepted all cash in the transaction.
The Debt Service Constant, also known as the Mortgage Constant, is a measure used in real estate finance to determine the annual debt service (principal and interest payments) payment required per dollar of the loan amount.
Deferred charges refer to nontangible costs that are anticipated to provide value over multiple years. These costs are amortized over the period they are expected to provide value, for accounting or tax purposes.
A Direct Reduction Mortgage is a type of fixed-rate mortgage where both interest and principal are repaid with each payment, ensuring that the loan is fully amortized over its term.
Equity buildup refers to the gradual increase in a homeowner's equity or ownership stake in a property as debt principal is paid down through scheduled mortgage payments.
Financial Accounting Standards Board (FASB) 141 outlines the principles for recognizing and measuring assets and liabilities acquired in a business combination. This standard ensures accurate financial reporting for mergers and acquisitions within Generally Accepted Accounting Principles (GAAP).
The Full Amortization Term is the amount of time it will take for a mortgage to be fully paid off through periodic payments of principal and interest. It specifies the duration within which the loan balance will reach zero, taking into account both the repayment of principal and the interest charges.
A fully amortized loan is a type of loan repayment structure where regular payments of both principal and interest are made over the course of the loan term, resulting in the total loan being paid off by the end of the term.
Funds From Operations (FFO) is a measure of the profitability of a Real Estate Investment Trust (REIT) derived from net income adjusted for non-cash items such as depreciation and amortization. It is widely regarded as a more accurate indicator of a REIT's performance than GAAP net income.
A graduated-payment mortgage is a home loan characterized by low initial monthly payments that gradually increase over time according to a predetermined schedule.
A Graduated-Payment Mortgage (GPM) is a type of fixed-rate mortgage where the initial payment starts low and then increases at regular intervals over a set period, after which it stabilizes for the remaining loan term.
A mathematically derived factor from compound interest functions indicating the level periodic payment required to fully pay off a $1.00 loan over a certain period.
An interest-only loan is a type of financing where the borrower only pays the interest on the principal balance at regular intervals until the loan reaches its maturity date, at which time the full principal amount becomes due. This type of loan does not require amortization during the length of the loan term.
A level-payment mortgage is a type of mortgage that requires the same payment each month (or other period) for full amortization. This means that the amount paid in monthly installments remains constant over the life of the loan.
Loan terms refer to the major requirements and conditions of a loan agreement, including aspects such as interest rates, repayment schedule, fees, and other obligations set by the lender and agreed upon by the borrower.
The mortgage constant is the percentage ratio between the annual debt service and the outstanding loan principal. It reflects both the interest and the amortization components of a loan and is used extensively in real estate to determine the annual loan payment.
The original cost represents the total purchase price initially incurred for acquiring an asset, including any associated acquisition expenses. This figure is essential for various financial calculations and reporting, forming the baseline for depreciation, amortization, or gain and loss assessments.
A permanent mortgage is a long-term financing option, typically over 10 years, used to finance the purchase or sustainment of a real estate property. It becomes fully amortized over time and is often used in conjunction with construction loans.
Principal and Interest Payment (P&I) refers to a periodic payment, usually made monthly, that includes the interest charges for the period plus an amount applied to the amortization of the principal balance, commonly seen with amortizing loans.
The amount owed on a debt, whether it is the original face amount or the remaining unpaid debt on a loan that has been partially amortized.
To retire a debt means to pay off the principal on a loan, thereby fulfilling the obligation under the loan contract, which can be done through regular payments or a lump sum. It is a significant financial milestone indicating that the borrower has met the terms laid out by the lender.
A type of mortgage loan commonly used in Canada, where the amortization term for principal repayment extends over a long period, but the interest rate is set for a much shorter term. The interest rate is renegotiated, or the loan 'rolls over,' at the end of this shorter term based on current market conditions.
The Rule of 78 is a method for calculating the amount of interest to be refunded if an installment loan with add-on interest is paid off early. It takes its name from the sum of the digits from 1 to 12, totaling 78.
A self-amortizing mortgage, also known as a fully amortizing mortgage, is one that retires itself through regular principal and interest payments over the life of the loan. At the end of the term, the loan balance reaches zero, meaning it is completely paid off.
Taxable income or loss is the amount of income or loss a taxpayer reports on their tax return from various sources, including rental real estate. It involves subtracting various allowable deductions from gross income to determine the net amount subject to taxation.
A Variable-Payment Plan is a mortgage repayment schedule that allows for periodic changes in monthly payments. These changes can result from the expiration of an interest-only period, a planned step-up in payments, or fluctuations in an interest rate index.
