Finance
An interest-only mortgage requires the borrower to:
APay only interest during the initial period, with no reduction in principal balance✓ Correct
BPay only principal with all interest deferred
CPay principal and interest equally each month
DMake balloon payments annually
Explanation
During the interest-only period, the borrower pays only interest—the principal balance doesn't decrease. After the interest-only period ends, payments increase (often substantially) to amortize the remaining balance. These loans were popular before the 2008 crisis.
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