Finance
What is 'amortization' in the context of an Illinois mortgage loan?
AThe process of paying off a loan through regular scheduled payments of principal and interest✓ Correct
BThe lender's fee for processing the mortgage application
CThe annual increase in property value used to calculate equity
DThe penalty for paying off a mortgage early
Explanation
Amortization is the process of gradually paying off a debt through regular installment payments that include both principal and interest. In a fully amortizing mortgage, each payment reduces the loan balance, and by the final payment, the loan is fully paid off.
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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.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
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.
Math Concepts
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