A Nebraska borrower, Kevin, takes out a deed of trust loan for $240,000 at an annual interest rate of 6%. His first monthly payment is interest-only. What is the amount of interest Kevin owes for the first month?
Correct Answer
B) $1,200
Step 1 — Calculate annual interest: $240,000 × 6% = $240,000 × 0.06 = $14,400 per year. Step 2 — Calculate monthly interest: $14,400 ÷ 12 = $1,200. Kevin's first month interest-only payment is $1,200. This calculation applies to the deed of trust promissory note, which is the debt instrument paired with the deed of trust security instrument under Nebraska's Trust Deeds Act.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An adjustable-rate mortgage (ARM) has an interest rate that changes periodically based on market conditions, typically after an initial fixed-rate period. The rate adjustment is tied to a financial index plus a margin.
Closing costs are the fees and expenses paid by the buyer and seller at the closing of a real estate transaction, beyond the purchase price. They typically range from 2-5% of the purchase price.
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
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