September 1

Capitalization


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Capitalization

Capitalization occurs when items owed on a loan are treated as part of a new, principal balance. When arrears are capitalized, the amount of the arrears is included in the principal before the interest is applied. Also, a mathematical process of estimating the value of a property using a proper rate of return on the investment and annual net income expected to be produced by the property. (Income Rate= Value)

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