Question

Real Estate loans can be structured in different ways. If a loan has payments with no...

Real Estate loans can be structured in different ways. If a loan has payments with no "amortization" element, the loan could also be called a(n) _______ loan?

Ch4

a. self-amortizing

b. negative amortizing

c. interest free

d. interest only

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Answer #1

An amortization loan is one where a series of equal payments are made where the principal component increases and interest component decreases with time.

In case of no amortization loan , the principal is paid lumpsum . The loan balance does not decrease over time.

Example of  no amortization loans is  interest only(Balloon Payment) loan. Under this loan , only interest is paid till the end of loan period. Finally the principal is paid at a time at the end as balloon payment.

If a loan has payments with no "amortization" element, the loan could also be called a(n) Interest Only loan?

d. interest only

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