Finance
An interest-only loan in Pennsylvania requires the borrower to pay:
AEqual principal and interest payments throughout the loan term
BOnly the interest portion — no principal reduction — during the interest-only period✓ Correct
CDouble the normal amortized payment
DPrincipal only until the loan is fully paid
Explanation
During an interest-only period, the borrower's payment covers only accruing interest — no principal is paid down. The loan balance remains unchanged.
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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.
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.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Math Concepts
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