Finance
The term 'amortization' in Mississippi mortgage lending means:
AThe process of paying off a loan in equal periodic payments that include both principal and interest✓ Correct
BThe early payoff of a mortgage
CThe adjustment of an ARM loan's interest rate
DThe process of converting a construction loan to a permanent mortgage
Explanation
Amortization is the process of gradually paying off a loan through regular scheduled payments that include both principal reduction and interest. In a fully amortizing loan, the balance reaches zero at the end of the 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.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Math Concepts
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