Finance
What is an interest-only mortgage in Kansas?
AA mortgage where each payment reduces the principal balance significantly
BA mortgage where payments cover only the interest due, with no principal reduction initially✓ Correct
CA mortgage with a fixed interest rate for the entire term
DA mortgage offered exclusively to first-time buyers
Explanation
An interest-only mortgage requires payments that cover only the interest due. The principal balance does not decrease during the interest-only period.
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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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