Finance
A North Dakota commercial mortgage that requires only interest payments during the loan term, with the entire principal due at maturity, is called a(n):
AFully amortizing loan
BInterest-only loan✓ Correct
CBalloon loan
DAdjustable-rate mortgage
Explanation
An interest-only loan requires payments of only interest during the loan term, with the full principal balance due at maturity (or when the interest-only period ends). The principal does not decrease during the interest-only period.
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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.
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.
Math Concepts
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