Finance
In NJ, the concept of 'amortization' in a mortgage means that:
AOnly interest is paid each month
BEach monthly payment includes both principal reduction and interest, with the balance between them shifting toward more principal over time✓ Correct
CThe loan balance increases over time
DAll payments are equal amounts of principal only
Explanation
In a fully amortizing NJ mortgage, monthly payments cover interest (calculated on the outstanding balance) plus principal reduction. Over time, as the balance decreases, more of each payment goes toward principal and less toward interest.
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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.
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.
Short SaleA sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
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.
Math Concepts
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