Using a Troubling Innovation in Real Estate Finance to Teach Loan Amortization Mechanics
This paper describes an innovation in mortgage finance that may reduce the benefits of making extra mortgage payments. Specifically, some loan servicers may not be using such payments to immediately reduce loan principal. Examples are provided to show that, ceteris paribus, this procedure can result...
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| Veröffentlicht in: | Journal of real estate practice and education 2012-01, Vol.15 (1), p.33-42 |
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| container_title | Journal of real estate practice and education |
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| creator | Larsen, James E. |
| description | This paper describes an innovation in mortgage finance that may reduce the benefits of making extra mortgage payments. Specifically, some loan servicers may not be using such payments to immediately reduce loan principal. Examples are provided to show that, ceteris paribus, this procedure can result in a substantially longer time until debt elimination, more total interest expense, and higher effective interest rates compared to loans where additional payments are traditionally applied. The effects are shown to be sensitive to the loan interest rate, the original loan life, and prepayment size, and to apply to both fixed-rate and adjustable-rate mortgages. |
| doi_str_mv | 10.1080/10835547.2012.12091699 |
| format | Article |
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| fulltext | fulltext |
| identifier | ISSN: 1521-4842 |
| ispartof | Journal of real estate practice and education, 2012-01, Vol.15 (1), p.33-42 |
| issn | 1521-4842 1930-8914 |
| language | eng |
| recordid | cdi_proquest_journals_1112277883 |
| source | JSTOR Archive Collection A-Z Listing |
| subjects | Amortization Deferred expenses Interest rates Lenders Loan payments Loan rates Loans Mortgage loans Mortgages Payments Real estate financing Real estate taxes Studies Tax payments |
| title | Using a Troubling Innovation in Real Estate Finance to Teach Loan Amortization Mechanics |
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