Property Valuation
In New Mexico, a property's 'economic life' refers to:
AThe physical life of the building materials
BThe period during which the improvement contributes positively to the property's value✓ Correct
CThe owner's holding period
DThe term of the mortgage loan
Explanation
Economic life is the period during which an improvement contributes to the property's value and has utility. It is typically shorter than the physical life—a building may still stand after its economic life has ended.
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Key Terms to Know
Depreciation
A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
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