Finance
What is the 'Rule of 78s' in mortgage lending?
AThe standard 78-question Georgia state exam
BA method of calculating prepayment penalties that front-loads interest in the early months of a loan✓ Correct
CA guideline limiting LTV ratios to 78% maximum
DThe rule that limits points to no more than 7.8% of the loan
Explanation
The Rule of 78s is a method of calculating the interest portion of each loan payment that allocates more interest to early payments. It makes prepayment more expensive because more interest has been 'earned' early.
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