Under New York lending regulations and standard mortgage practices, all of the following statements about interest calculations are correct EXCEPT:
Correct Answer
D) Interest charges are calculated on the total loan amount including principal, interest, taxes, and insurance
Interest is calculated only on the outstanding principal balance of the loan, not on the total PITI (Principal, Interest, Taxes, Insurance) payment amount. Taxes and insurance are separate components of the monthly payment and do not accrue interest.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
The loan-to-value ratio (LTV) is the percentage of a property's appraised value or purchase price (whichever is lower) that is being financed through a mortgage. LTV = Loan Amount / Property Value.
A comparison of the major mortgage loan types—conventional, FHA, VA, and USDA—covering their eligibility requirements, down payment amounts, mortgage insurance rules, and best use cases.
More Financing Questions
Which Hawaii rule controls when a lender intends to use power of sale foreclosure on residential property?
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