Finance
An interest-only loan is one where:
AThe borrower pays only principal until the loan matures
BThe borrower pays only interest for a specified period, after which principal payments begin or the loan balloons✓ Correct
CThe interest rate is fixed for the life of the loan
DThe government subsidizes part of the interest payment
Explanation
During the interest-only period, borrowers pay only interest, which keeps payments low but builds no equity. When the interest-only period ends, payments increase significantly to include principal, or the full balance may become due.
Related Arkansas Finance Questions
- Which type of mortgage features payments that remain constant but are applied entirely to principal (no interest)?
- What is the minimum down payment typically required for an FHA-insured mortgage?
- RESPA (Real Estate Settlement Procedures Act) primarily regulates:
- What is the purpose of a loan origination fee?
- The term 'underwater' or 'upside down' on a mortgage means:
- The qualified mortgage (QM) rule was established by the Consumer Financial Protection Bureau (CFPB) to:
- Which type of loan is backed by the full faith and credit of the U.S. government and is designed to help veterans purchase homes?
- One discount point paid on a mortgage loan is equal to:
Practice More Arkansas Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Arkansas Quiz →