General Mortgage KnowledgeQuestion 116 of 400
During the initial period of an interest-only loan, what happens to the principal balance if the borrower pays only the required payment?
a.It decreases quickly
b.It is forgiven
c.It increases
d.It stays the same
Explanation
With an interest-only payment, no principal is paid, so the balance stays the same during the interest-only period. It does not amortize down, is not forgiven, and does not grow (that would be negative amortization).
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