Question at position 21 One of the main distinctions between a construction loan and permanent financing is that a construction loan payment is “Interest Only” and permanent financing is “Amortizing”, meaning the principal is paid down over the life of the loan?TrueFalse单项选择题
A
True
B
False

Question

Question at position 21 One of the main distinctions between a construction loan and permanent financing is that a construction loan payment is “Interest Only” and permanent financing is “Amortizing”, meaning the principal is paid down over the life of the loan?TrueFalse单项选择题

A

True

B

False

BlackTom AI · Accepted Answer

The question asks about a key difference between construction loans and permanent financing, specifically regarding how payments are structured.
Option 1: True. The traditional distinction is that a construction loan is typically interest-only during the construction period, with principal not being paid down until conversion to permanent financing or payoff. Once the project is complete and permanent financing is in place, payments generally become amortizing, meaning the principal is gradually paid down over the loan term. This aligns with common lending practice, where lenders restrict principal repayment during construction to preserve liquidity for the project and to reflect that the asset is not yet generating stable cash flow.
Option 2: False. Saying that construction loan payments are not interest-only or that permanent financing is not amortizing would contradict the standard industry practice described above. While there can be variations (for example, construction loans with some level of amortization during construction or unusual permanent loan structures), the general and widely taught distinction is as stated in Option 1. Misconceptions here might come from scenarios where a lender includes a small amortization during construction or where a construction-to-perm loan features a blended payment schedule, but those are exceptions rather than the norm.
In summary, the accepted understanding is that construction loans are typically interest-only during construction, and once converted to permanent financing, the loan becomes amortizing over its term, resulting in principal reduction over time. This helps explain why Option 1 reflects the conventional distinction, while Option 2 describes an inaccurate simplification of standard industry practice.

Question at position 21 One of the main distinctions between a construction loan and permanent financing is that a construction loan payment is “Interest Only” and permanent financing is “Amortizing”, meaning the principal is paid down over the life of the loan?TrueFalse单项选择题

类似问题

In implementing a credit card payment program, assuming to stop using credit, your debt balance will decrease slowly at first and more quickly as time progresses.

You bought a new car today which cost you $20,000. You financed the entire cost with a 5-year loan at 4.00%. If you make payments at the end of each month starting a month from now, how much is your monthly payment?

You plan to apply for a $50,000 loan. The APR is 5.5% compounded quarterly. If you plan to make payments of $2,000 per quarter, how many years do you need to pay off the loan?

Elena is looking to buy a car for $10,000. She is planning to buy this car by borrowing 60% of the car price. The bank is happy to do the loan for 3 years at a rate of 7.67% per year. Calculate the monthly car loan repayment In your answer, ignore the "$" and enter with 2 decimal places

Question at position 25 At the end of a fully amortized loan, there is a final balloon payment to the lender.TrueFalse

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单