A principal and interest mortgage differs from an interest-only mortgage in that:
Correct Answer
C) Principal and interest repayments reduce the loan balance over time
With principal and interest repayments, each payment includes both interest charges and a portion that reduces the principal loan amount. Interest-only payments only cover the interest charges, leaving the principal balance unchanged.
Why This Is the Correct Answer
Principal and interest repayments cover the interest and repay part of the loan each time, so the balance falls over the term. Interest-only repayments leave the balance unchanged during the interest-only period.
Why the Other Options Are Wrong
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