Finance
A NJ seller 'carrying back' a second mortgage for $40,000 at 6% interest-only for 3 years means the seller will receive monthly payments of:
A$0 until the balloon is due
B$200 per month interest✓ Correct
C$400 per month interest
D$1,200 per month
Explanation
Monthly interest on a $40,000 interest-only note at 6% annual rate = $40,000 × (0.06 ÷ 12) = $40,000 × 0.
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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.
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