Finance
In New Hampshire, mortgage interest is typically paid:
AIn advance for the coming month
BIn arrears — the monthly payment covers interest accrued during the prior month✓ Correct
COn a quarterly basis
DAnnually in a lump sum
Explanation
Mortgage interest is paid in arrears. The monthly payment made on the first of the month covers the interest that accrued during the previous month — unlike rent, which is generally paid in advance.
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Key Terms to Know
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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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