Finance
In South Carolina, what is a 'participation mortgage'?
AA mortgage held by multiple lenders simultaneously
BA mortgage where the lender receives a share of the property's income or appreciation in addition to interest✓ Correct
CA mortgage requiring participation in homebuyer education
DA government mortgage program requiring community participation
Explanation
A participation mortgage (equity participation mortgage) gives the lender a share of the property's rental income or appreciation in exchange for a lower interest rate. They are more common in commercial real estate than residential.
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Key Terms to Know
Discount Points
Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
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.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Math Concepts
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