Virginia State Real Estate Exam Practice Question
Negative amortization is:
Correct Answer: C
Rationale: Negative amortization occurs when the payments made on a loan are less than the interest accrued, leading to an increase in the total mortgage debt. This situation typically arises when borrowers opt for lower initial payments that do not cover the full interest cost.
Option A refers to basis points, which are used to adjust interest rates but do not directly relate to negative amortization.
Option B suggests that every interest-only loan results in negative amortization, which is incorrect; not all interest-only loans lead to this outcome, as some borrowers may pay off the principal in a timely manner.
Unlock All Questions
Subscribe to Premium for full access to all practice questions, detailed rationales, and performance tracking.
Subscribe Now