Question

A mortgage broker advertises a 3.5% fixed payment on a 30-year loan implying that the offer was for a 30-year loan with a 3.5% fixed interest rate. The broker instead offered ARMs with an option to pay various amounts, including a minimum monthly payment that represented only a portion of the required interest. This is an example of a:

Answer 1

Answer:

Amortized loan

Explanation:

An amortized loan is a type of debt in which borrower prepares a schedule for the repayment of principal and interest. The schedule is prepared based on amortization rate and years to maturity. The amortization schedule calculates the minimum monthly payment which includes principal and interest.