A collateralized mortgage obligation (CMO) is a type of security backed by a pool of mortgage loans that are structured into different classes, each with distinct maturities. CMOs, often using Real Estate Mortgage Investment Conduits (REMICs) as a standard investment vehicle, provide investors with specified periodic interest and principal payments.
The contract interest rate, also known as the face interest rate, is the interest rate specified in a loan agreement or mortgage note. This rate is used to calculate the periodic interest payments owed by the borrower throughout the loan term.
Debt service refers to the periodic payments, typically consisting of both principal and interest, made on a loan. It is a crucial concept in real estate finance and investment, as it impacts cash flow, profitability, and overall financial health of a property or investment.
Deferred payments refer to the payments that are postponed and scheduled to be made at a future date. Commonly utilized in various financial contexts, it allows borrowers to delay payments of the principal or interest.
Financing expenses refer to the costs associated with borrowing funds to acquire real estate assets, including interest on loans and ground rent. It is distinct from operating expenses, which are related to the day-to-day operations of the property.
