Check Your Understanding Answers
- Why might a graduated payment mortgage be appealing to someone who is just starting a career?
The monthly payment for principal and interest gradually increases by a certain percentage each year for a certain number of years and then it levels off. The buyer can qualify for the loan based on expected salary increases.
- What is a release clause and in what type of mortgage would you find this clause?
This clause, found in a blanket mortgage, allows the borrower to obtain a release of any individual lot from the lien by repaying a certain part of the loan. The lender will issue the partial release for the one lot, with the provision that the mortgage will continue to cover the remaining lots.
- Describe a reverse annuity mortgage.
With this type of mortgage, the lender makes payments to the borrower. This system allows older property owners to receive regular monthly payments from the equity in their paid-off property without having to sell.
- Define a purchase money mortgage.
With a purchase money mortgage, the buyer borrows from the seller in addition to the lender. This is sometimes done when a buyer cannot qualify for a bank loan for the full amount, so the seller “takes back” a portion of the purchase price as a second mortgage.
