Finance
A Vermont 'construction loan' is typically structured as which type of financing?
AA 30-year fixed-rate permanent mortgage
BShort-term, interest-only draws as construction progresses, converted to a permanent mortgage upon completion✓ Correct
CA federally guaranteed VA loan for veterans only
DA tax-exempt municipal bond program
Explanation
Vermont construction loans are short-term facilities (typically 12–24 months) that disburse funds in draws as construction milestones are met. Borrowers typically pay interest only during construction.
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Key Terms to Know
Discount Points
Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
AmortizationThe 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.
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