Finance
Which of the following best describes 'interest-only' loans and their risk for Louisiana borrowers?
AInterest-only loans guarantee the lowest possible monthly payments forever
BInterest-only loans have lower initial payments but no principal reduction, creating risk when the amortization period begins or the property needs to be sold/refinanced without equity✓ Correct
CInterest-only loans are always the best choice for investment properties
DInterest-only loans are guaranteed by the federal government
Explanation
Interest-only loans require only interest payment initially, with no principal reduction — meaning no equity build-up. When the interest-only period ends, payments increase substantially, and if the property hasn't appreciated, the borrower has no equity cushion.
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