Life Insurance
Whole life insurance, also known as “cash-value” insurance is a basic and consistent type of permanent life insurance which remains in effect your entire life at a level premium. This life insurance is a good choice got you if you do not expect your life insurance needs to diminish over time. A portion of your premium goes into a reserve fund called ‘cash value’ that builds up over the years your policy is in affect. Your reserve fund is tax-deferred and you can borrow against it, until you withdraw it.
The premiums must generally remain constant over the life of the policy and must be paid periodically according to the amount indicated in the policy. You may also have the option of a single premium paying all of the premiums at once with a single lump sum. Your cash values will grow to equal the amount of the death benefit when you turn to age 100.
Although, whole life insurance is very expensive, and if you’re on a limited budget, you may not be able to afford all the insurance coverage you actually need. But the plus point is that the death benefit is guaranteed as long as premiums are met. Also death benefit will never decrease if you don’t borrow against it.
Categories: Insurance Tags: cash-value, life insurance
Prepayment Clause
To prepay means to pay off the indebtedness before the end of the loan term. Under traditional common law, the mortgagor has no right to prepay a mortgage unless the right is explicitly rovided by a prepayment clause. In some states statutory law has reversed this. Now, any note that is silent as to the right of the obligor to prepay the note in advance of the stated maturity date may be prepaid in 111 by the obligor or his successor in interest without penalty.
In typical prepayment clauses a statement is made as to (1) whether there is a penalty for prepayment; (2) whether extra payments directly reduce the principal upon which interest is computed or eliminates the last payment, and (3) whether the number and size of extra payments in any one year are restricted. Some lenders try to discourage a fast turnover of funds, which is costly to them, by imposing prepayment penalties during the early years.
These penalties are usually stated as a percentage of the unpaid balance, and the percentage charge is usually reduced in later years of the mortgage term. Most savings and loan institutions have a prepayment clause in the note. Typically it states that the borrower has the right to prepay the outstanding principal amount in whole or in part and that the outstanding amount of the extra payment is applied against the principal amount. In addition, such clauses usually state that any extra payment does not extend or postpone the due date of subsequent monthly installments, or change the amount of the installments.
Categories: Admin Note Tags: Prepayment Clause
Acceleration & Renegotiable Rate Clause
In every mortgage loan there are several clauses that state the rights of the mortgagor and the mortgagee during the tenn of the mortgage loan agreement. The various clauses (or provisions) that may be found in the debt agreement are as follows:
Acceleration clause
Lenders usually insist that the instrument contain an acceleration clause that makes the entire debt due in the event of default. This clause precludes the necessity for the lender to bring separate lawsuits against the same mortgagor for each late payment. This clause usually states that if any covenants are breached, including the obligation to pay the sums secured by the mortgage when due, then the full amount is due immediately. This declaration of full payment due is at the option of the lender.
Renegotiable rate clause
A renegotiable rate mortgage (RRM) is a series of short-term loans secured by a long-term mortgage. The short-term loans are automatically renewable at equal intervals of three to five years each. The mortgage term may not exceed 40 years. The monthly payments are made in equal installments. However, at the end of the life of each short-term loan, the interest rate may be
changed. Changes are based on the movement of an index such as the Federal Home Loan Bank Board’s most recent monthly national average contract mortgage rate index. The interest rate is the only term-that may be altered. An interest rate.modification results in a change of the monthly payment. The new payment amount remains stable until the loan term has again expired.
Categories: Admin Note Tags: Acceleration & Renegotiable Rate Clause
