Finance
What is 'amortization' in an Oregon mortgage loan?
AThe increase in property value over the loan term
BThe gradual reduction of the loan balance through scheduled principal and interest payments✓ Correct
CThe process of converting an ARM to a fixed-rate loan
DThe penalty charged for paying off a loan early
Explanation
Amortization is the process of gradually paying down a mortgage balance through regular payments that include both interest and principal. In a fully amortizing loan, the balance reaches zero at the end of the term.
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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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