Finance
In New York, a 'construction loan' is typically converted to a:
AGround lease
BPermanent (take-out) mortgage upon completion of the construction✓ Correct
CPurchase money mortgage
DSecond mortgage
Explanation
Construction loans are short-term, interest-only loans that finance building construction. Upon completion, they are typically converted to (or replaced by) a permanent mortgage (take-out loan) with standard amortization terms.
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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.
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.
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.
Math Concepts
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