Finance
What does 'amortization' mean in the context of a Colorado mortgage?
AThe process of foreclosing on a delinquent mortgage
BThe gradual reduction of the loan balance through scheduled principal and interest payments✓ Correct
CThe lender's calculation of the property's value
DThe process of transferring title at closing
Explanation
Amortization is the process of paying off a loan through regular scheduled payments that include both principal and interest. With each payment, the loan balance decreases (is amortized) until it reaches zero at the end of the loan term.
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Key Terms to Know
Amortization
The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Math Concepts
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