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Mortgage Terms

Adjustable rate mortgage – A mortgage where the interest rate changes during the life of a loan in line with changes in an index (such as the prime rate.) Also called a variable rate mortgage.

Amortization – Gradual payment of a debt, which includes the interest, and eventually all of the principal.

Assumable mortgage – A mortgage that can be passed on to a new owner at the previous owner’s interest rate.

Brokerage fee – The fee the broker charges for his or her services

Conventional loan – A mortgage or deed of trust not obtained under a government insured program, such as FHA or VA.

Correspondent lender – Can lend mortgage money, and service the loans for a maximum of four months. Also can act as broker.

Credit report – A report on the past ability of a loan applicant to pay installment payments.

Discount fee (discount points) – Money the borrower pays the lender at closing to “buy down” the mortgage rate --- get a lower interest rate on the monthly payments. One discount point equals one percent of the mortgage amount. Also see “points.”

Fixed rate mortgage – A mortgage in which the interest rate remains the same throughout the life of the mortgage.

Foreclosure – Sale by a lender of a property on which payments are seriously in default.

Graduated payment mortgage – A mortgage calling for increasingly higher payments over the term of the loan. This allows the buyer low beginning payments. The payments then increase, as theoretically, the buyer’s earnings increase.

Insured mortgage – A mortgage insured against loss to the mortgagee in case of default. May be insured by the FHA, VA or by independent mortgage insurance companies.

Interest rate cap – The maximum interest rate increase of an adjustable rate mortgage.

Loan commitment – A written promise to make or insure a loan for a specified amount and on specified terms.

Mortgage broker – Arranges for loans with lenders. Does not make or service loans, which involves processing monthly payments.

Mortgage lender – Lends mortgage money and services loans. Also can act as a broker.

Origination fee – The fee the lender charges to start the loan

Points – Part of the settlement costs of exchanging real estate. One point equals one percent of the mortgage amount. Points are paid to the mortgage lender, technically by the seller of the property. However, because the price of the house normally is adjusted to allow for this, points effectively increase the interest rate on the loan to the buyer.

Purchase money mortgage – Mortgage granted directly by a seller to the buyer. The buyer may take back the property if the buyer does not pay off the mortgage as agreed.

Settlement costs – The amount of money needed by the buyer at closing. Charges include origination fees (points), appraisal fees, credit report costs, tax service fees and pro-rations, insurance premiums and reserves, title insurance costs, government recording and transfer fees, surveying charges, pest control and termite inspection charges.

Taken from The Fort Myers News Press Business Supplement.

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Average island prices drop but sales pick up pointing to good season

The average price of property sold on Sanibel between January 1^st and September 30^th has dropped 19% so far this year making a 25 percent decrease on average prices of sold property on Sanibel over two years.

The most expensive properties showed the biggest drop with a 27 percent drop in beachfront property prices and a 23 percent drop in bay front property. The only property type that gained was inland property which increased 13 percent in the first three quarters of this year.

Captiva fared no better with property prices overall dropping 30 percent over the year and 26 percent over two years. All categories dropped with near beach properties dropping as much as 55 percent.

Take a longer view and the picture is better. Captiva does better than Sanibel. Over five years, the average price of Captiva property has gained 57 percent. (But bear in mind that Captiva was still recovering from Hurricane Charlie five years ago and prices were depressed.) Average prices on Sanibel dropped just 9 percent over five years.

Take a still longer view and all categories fared, if not brilliantly, at least adequately. Sanibel prices have increased 50 percent in the last ten years and Captiva prices have gone up 42 percent with Captiva beachfront and Captiva near beach homes starring with 86 percent and 94 percent increases respectively. For a spreadsheet of island prices over ten years and more, e-mail Wendy at Wendy@SanibelProperty.com

And now for even better news…… Following a dismal start, a lackluster spring and a mediocre summer, sales have already started picking up for the fall with 17 homes and 14 condos either pending or contingent. This is highly unusual: October is generally our slowest month.