Finance
An interest-only mortgage in Vermont allows the borrower to:
APay no interest for the first five years
BPay only interest for a specified period, with no principal reduction until the interest-only period ends✓ Correct
CDefer all payments until sale
DPay interest at a reduced rate permanently
Explanation
During the interest-only period of an interest-only mortgage, the borrower pays only the interest charge and no principal. After the interest-only period ends, payments increase to include principal amortization.
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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.
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.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Math Concepts
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