Finance
A Florida mortgage that allows the borrower to pay interest only for an initial period, then requires full amortization, is called a(n):
AReverse mortgage
BInterest-only mortgage✓ Correct
COpen-end mortgage
DParticipation mortgage
Explanation
An interest-only mortgage requires the borrower to pay only interest for an initial period (typically 5-10 years), after which payments increase to fully amortize the principal over the remaining 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.
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.
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.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Math Concepts
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