Real estate and lending chapter 18

1. CHP 18
CONSUMER LOANS, CREDIT
CARD & REAL ESTATE
LENDING
Presented by SHAHBAKHT ZAHRA
20011554-001

2. REAL ESTATE LOANS AND ITS TYPES
• Loans which are used for acquisition of real property such as homes Apartment
complexes shopping centres office building or land are called real estate loans
• Types of REAL ESTATE CREDIT
SHORT TERM CONSTRUCTION
• Loans paid out with in months as a building project is completed
LONG TERM
• May stretch out 25 to 30 years in order to provide permanent finance for
acquisition of real property

3. REAL ESTATE AND OTHER LOANS
• Q 18-12) In what ways is a real estate loan unique compared to other
kinds of bank loans?
1. Size of loan
Estate loan requires a large amount mean while other loans are in
small amount or amount less than R.E loans
2. Time duration of loan Equity loans are usually for long for long
period of time 25-30 or upto the time of completion of a project
while other loans are usually short term or for the fixed period etc
10 years.
3. income and Purpose of laon

4. Factors In Evaluating in
Application for Real Estate Loans
• Evaluate loan amount and Price of property
• Future relationship btw borrower and lender
• FOR HOME MORTAGE LOANS
following things should be checked
i. Amount and stability of income
ii. Borrower saving and down payment source
iii. Record of borrower regarding managing
property
iv. Market value of mortgage
v. Market interest rates

5. HOME EQUITY LENDING
• Home equity lending is a way to provide secured loans to
homeowners, using the equity in their properties as
collateral.
Borrowing Base
the difference between a home's estimated market value and
amount of mortgage loans against it
example if a home was purchased for $100,000 and has
70,000 mortgage loan against it today and you do inflation
and growth demand for housing it market value is now
15,0000 the homeowner will having a boring base of about
8,0000 the base might draw upon as a collateral for loan to
remodel the home.

6. TYPES OF HOME EQUITY
LOANS
• Traditional home equity loan
• a close End credit covering a specific period of months and
years use mainly for home improvements credit are usually or
normally repaid in equal installments quarterly or monthly
basis and the most frequently secured by a second mortgage
against the borrower home the lump sum credit is usually
carries of fixed interest rate.
• line of credit against a home borrowing
• base Many lenders now offer home equity lending
Opportunity by offering consumer a second and new type of
home equity loan they usually determine the credit limit on
these home equity lines by taking a percentage of appraised
value of borrowing customers home and subtracting the
amount of customer still owes on his existing loan.

7. Advantages
and
DisAdvantages
• Q14
• Advantages of Home Equity
Lending
• 1. Lower Interest Rates
• 2. Tax Deductibility
• 3. Flexible Use of Funds
• 4. Higher Loan Amounts
• 5. Longer Repayment Terms
• Disadvantages of Home
Equity Lending:
• 1. Risk of Home Loss
• 2. Market Fluctuations
• 3. Upfront Costs
• 4. Variable Interest Rates
• 5. Over-Borrowing Risk

8. 15-How is the changing age
structure of population likely to
affect consumer loan program ? what
other forces are reshaping
household lending today?
• Slow down credit trends
People are trying to pay there out
standing debts and don’t encourage
new credit at certain age .
Other Forces
• Deregulations
• Preapproved credit programs
• Technology and Digitization
• Pandemic

9. 16.What
challenges have
us bankruptcy
law provided
for consumers
and those
lending money
to them
• U.S. bankruptcy laws present challenges for both
consumers and lenders. From a consumer perspective,
navigating the bankruptcy process can be complex and
time-consuming. Chapter 7 bankruptcy, while offering
debt relief, may require liquidation of assets, impacting
the debtor's financial standing. Chapter 13 involves a
repayment plan, posing challenges for individuals to meet
ongoing financial obligations. For lenders, bankruptcy
introduces the risk of losing a portion of their outstanding
loans or not fully recovering the debt. The automatic stay
provision can temporarily halt collection efforts, affecting
the lender's ability to recoup funds promptly. Striking a
balance between providing a fresh start for consumers
and protecting the interests of lenders remains an ongoing
challenge within the U.S. bankruptcy framework.

10. What option does a
loan officer have in
pricing consumer loans
• Cost plus model many consumer
loans are priced of some base or
cost rate with a profit margin and
compensation for Risk added. To
find cost

11. Annual Rate Percentage
• The Annual Percentage Rate (APR) is the
cost you pay each year to borrow money,
including fees, expressed as a percentage.
The APR is a broader measure of the cost
to you of borrowing money since it reflects
not only the interest rate but also the fees
that you have to pay to get the loan

12. Simple Interest Method
• multiply the loan's principal amount by
the annual interest rate by the term of
the loan in years. This type of interest
usually applies to automobile loans or
short-term loans, although some
mortgages use this calculation method

13. ARMs & FRMs
•
Adjustable Rate Mortgages
(ARMs)
Features a variable interest rate that
can change periodically after an
initial fixed period, offering
potential initial savings but
introducing risk of payment
fluctuations.
• Fixed Rate Mortgages (FRMs)
Maintains a constant interest rate
throughout the entire loan term,
providing stability in monthly
payments and shielding borrowers
from market fluctuations

14. Difference
Between ARM &
FRM
• Interest Rate Structure
• Rate Stability
• Initial Interest Rate
• Risk and Uncertainty
• Borrower Profile
• Market Conditions Impact
• Suitability

15. Points
home Mortgage Loan agreements often
required borrows to pay an additional
charge called points. This extra charge is
determined by multiplying the amount of
home alternate Loan by a specific
percentage figure.