### What does the term 'remaining term' refer to in a loan context? - [ ] The original amount of the loan - [ ] The interest rate on the loan - [ ] The monthly payment amount - [x] The number of months still outstanding on a loan > **Explanation:** The remaining term refers to how many months are left until the loan is fully paid off. It's calculated by subtracting the number of payments already made from the original term of the loan. ### How can borrowers reduce the remaining term of a loan? - [ ] By negotiating a new interest rate - [x] By making additional principal payments - [ ] By increasing their monthly payment - [ ] By extending the loan term > **Explanation:** Borrowers can reduce the remaining term of their loan by making additional principal payments. This reduces the principal balance faster than scheduled, shortening the overall repayment period. ### Why might a borrower inquire about the remaining term of a loan? - [ ] To find out their monthly interest - [x] To ensure the asking price of a property is sufficient to cover the existing loan - [ ] To update their credit score - [ ] To calculate their tax deductions > **Explanation:** Borrowers may inquire about the remaining term to know the outstanding balance, which helps them ensure that the asking price of the property they plan to sell is enough to cover the existing loan. ### The original term of a loan refers to: - [x] The number of payments required to fully repay the loan - [ ] The number of payments that have already been made - [ ] The initial interest rate of the loan - [ ] The total interest payable over the loan term > **Explanation:** The original term of a loan is the total number of payments initially agreed upon to fully repay the loan amount. ### What happens to the remaining term if additional principal payments are made regularly? - [x] The remaining term decreases - [ ] The remaining term stays the same - [ ] The remaining term increases - [ ] The interest rate increases > **Explanation:** Making additional principal payments decreases the principal balance more quickly, which reduces the remaining term of the loan. ### Why is it important for borrowers to know the remaining term when considering putting their home on the market? - [ ] To find a new home - [ ] To calculate future tax deductions - [x] To ensure the asking price is sufficient to cover the existing loan - [ ] To find out the new interest rate > **Explanation:** Borrowers need to know the remaining term to calculate the outstanding loan balance and ensure the property's asking price covers this existing debt. ### What effect do additional principal payments have on the balance of the loan? - [x] They decrease the balance faster - [ ] They increase the balance - [ ] They keep the balance the same - [ ] They affect the interest rate > **Explanation:** Additional principal payments are applied directly to the principal, reducing the balance faster than scheduled, which also shortens the remaining term. ### If a borrower originally has a 30-year mortgage and has made 120 payments, what is the remaining term? - [ ] 120 months - [ ] 360 months - [ ] 300 months - [x] 240 months > **Explanation:** A 30-year mortgage has an original term of 360 months. After making 120 payments (10 years), the remaining term would be 240 months. ### What is another term for the original term of the loan? - [ ] Remaining balance - [x] Loan tenor - [ ] Maturity rate - [ ] Equity > **Explanation:** The original term or loan tenor refers to the duration over which the loan is supposed to be repaid, typically represented in months or years. ### Can the remaining term of a loan change over time? - [x] Yes - [ ] No > **Explanation:** The remaining term of a loan can change, primarily if additional principal payments are made, which speed up the repayment, thus reducing the term. ### When a borrower makes additional principal payments, these payments are applied to: - [ ] Interest - [x] Principal - [ ] Future payments - [ ] Loan fees > **Explanation:** Additional principal payments are applied directly to the principal balance of the loan, thereby reducing the overall debt faster. ### What is the relationship between the amount of additional principal payments and the reduction in the remaining term? - [ ] Directly proportional - [x] Inversely proportional - [ ] No correlation - [ ] Dependent on interest rate > **Explanation:** The more additional principal payments a borrower makes, the fewer the total number of payments needed to repay the loan, thus reducing the remaining term of the loan. ### Borrowers might want to reduce the remaining term of their loan primarily to: - [ ] Qualify for a new loan - [ ] Increase their monthly payment - [x] Save on interest payments - [ ] Pay more in taxes > **Explanation:** By reducing the remaining term, borrowers can shorten the time over which interest accrues, thereby saving on the total interest paid over the life of the loan. ### A borrower has an original loan term of 25 years. After making 15 years of payments, the borrower makes large additional principal payments for 1 year. How does this affect the remaining term? - [ ] It increases the remaining term. - [x] It decreases the remaining term. - [ ] No change to the remaining term. - [ ] It resets the remaining term. > **Explanation:** By making large additional principal payments, the borrower decreases the principal balance faster, thus reducing the remaining term. ### What happens to the interest savings when the remaining term decreases due to additional principal payments? - [x] Interest savings increase - [ ] No change in interest savings - [ ] Interest savings decrease - [ ] New interest charges are added > **Explanation:** With a shorter remaining term and lower principal balance, the total amount of interest paid over the life of the loan decreases, leading to overall interest savings. ### How does making additional principal payments affect a borrower's equity in a property? - [x] It increases equity - [ ] It decreases equity - [ ] Equity remains the same - [ ] It impacts future equity only > **Explanation:** Additional principal payments reduce the loan balance, thereby increasing the borrower's equity in the property. ### Can the remaining term be affected by changes in the interest rate on a variable-rate loan? - [x] Yes - [ ] No > **Explanation:** On a variable-rate loan, changes in the interest rate can affect the amount of each payment going towards principal versus interest, thereby influencing the remaining term. ### Is the remaining term always calculated in the same way for all types of loans? - [ ] Yes, all loans use the same calculation - [x] No, the method can vary > **Explanation:** While the basic concept of remaining term involves subtracting made payments from the original term, different types of loans (fixed-rate, variable-rate, etc.) may have specific methods for calculating outstanding terms. ### Can paying additional amounts toward principal change the fixed monthly payment on a traditional fixed-rate mortgage? - [ ] Yes - [x] No > **Explanation:** On a traditional fixed-rate mortgage, paying additional amounts toward principal does not change the fixed monthly payment but reduces the loan term and total interest paid. ### What calculation is needed to find the remaining term if you know the original term and number of payments made? - [x] Subtract payments made from the original term - [ ] Add payments made to the original term - [ ] Multiply payments made by the original term - [ ] Divide the original term by payments made > **Explanation:** The remaining term is found by subtracting the number of payments already made from the original term of the loan. ### Is the concept of 'remaining term' applicable to both loans and leases? - [x] Yes - [ ] No > **Explanation:** The concept of 'remaining term' applies to both loans and leases, as both involve a defined period over which payments are made. ### When does knowing the remaining term become particularly significant for a borrower? - [ ] When applying for a new credit card - [ ] When considering a career change - [ ] When setting personal savings goals - [x] When planning to sell the property > **Explanation:** Knowing the remaining term is crucial when planning to sell a property to ensure that the selling price can cover the outstanding loan amount. ### Can the remaining term be adjusted without an additional principal payment? - [x] Yes - [ ] No > **Explanation:** The remaining term can also be adjusted through loan refinancing or loan modifications, not just via additional principal payments. ### Does a shorter remaining term always mean higher monthly payments? - [ ] True - [x] False > **Explanation:** A shorter remaining term typically results from making larger or additional payments, but it doesn't necessarily mean higher monthly payments - it means the term within which those payments are made is shorter. ### If a loan is said to be "amortizing," what does that mean about its remaining term? - [ ] The remaining term always stays the same - [x] The remaining term linearly decreases with payments - [ ] The interest rate affects the remaining term unpredictably - [ ] The remaining term is fixed initially but not afterward > **Explanation:** An amortizing loan is structured so that regular payments are made over a set term, which gradually reduces both principal and interest, thus causing a linear decrease in the remaining term. ### Will the remaining term be affected if a borrower consistently makes payments that are exactly as scheduled? - [x] No - [ ] Yes > **Explanation:** If payments are exactly as scheduled, the remaining term follows the original amortization schedule without change. ### Can refinancing change the remaining term of a loan? - [x] Yes - [ ] No > **Explanation:** Refinancing a loan can alter the remaining term as it usually involves negotiating new payment terms and schedules. ### If interest rates drop, and a borrower decides to make higher than scheduled payments, what happens to the remaining term? - [x] It decreases - [ ] It increases - [ ] It remains the same - [ ] It becomes indeterminate > **Explanation:** Higher payments directly reduce the principal faster, thus decreasing the remaining term. ### In what scenario would the remaining term increase? - [x] By choosing loan deferment - [ ] By making additional principal payments - [ ] By lowering interest rates - [ ] By consolidating multiple loans > **Explanation:** Loan deferment often extends the repayment period, which increases the remaining term. ### What is a potential benefit of keeping the regular payments but also making occasional additional principal payments? - [ ] Higher interest rates - [x] Shortened term and saved interest - [ ] Increased overall principal - [ ] Increased monthly payment > **Explanation:** Keeping regular payments while adding occasional additional principal payments means you'll repay the loan faster, reducing term length and saving on interest. ### If a borrower makes interest-only payments, what happens to the remaining term? - [ ] It increases - [ ] It decreases - [x] It remains the same - [ ] It becomes zero > **Explanation:** Interest-only payments do not reduce the principal balance, so the remaining term remains unchanged. ### Assuming all other factors are constant, if a borrower initially makes consistent timely payments but then skips payments due to financial hardship, what happens to the remaining term? - [x] It increases - [ ] It decreases - [ ] It stays the same - [ ] It doubles > **Explanation:** Skipping payments usually results in an extended remaining term as the repayment schedule gets altered. ### If a borrower moves to a bi-weekly payment plan instead of a monthly plan, how does it typically affect the remaining term? - [x] It decreases - [ ] It increases - [ ] It doubles - [ ] It stays the same > **Explanation:** With bi-weekly payments, the borrower ends up making an additional full payment per year, thus reducing the remaining term. ### How does paying off a chunk of the principal impact the next month's interest calculation on a fixed-rate loan? - [x] It reduces the interest - [ ] It increases the interest - [ ] It keeps the interest the same - [ ] Interest calculations stop > **Explanation:** As interest is calculated on the remaining principal balance, reducing the principal lowers the interest for future payments. ### Does making additional principal payments have an impact on future amortization schedules? - [x] Yes - [ ] No > **Explanation:** Additional principal payments alter the amortization schedule by decreasing the remaining principal faster, leading to a shortened term and lower interest accruals. ### What is one reason a borrower might not want to make additional principal payments? - [ ] Desire to save on interest - [ ] To shorten the loan term - [x] Need for liquidity - [ ] To build equity quickly > **Explanation:** Making additional principal payments reduces liquidity as funds are tied up in the home equity rather than being easily accessible cash. ### Do taxes play a role in deciding whether to make additional principal payments? - [x] Yes - [ ] No > **Explanation:** Mortgage interest is often tax-deductible, so reducing interest payments with additional principal payments can affect tax deductions, which could play a role in the decision-making process. ### Can a borrower negotiate the remaining term when they refinance their mortgage? - [x] Yes - [ ] No > **Explanation:** When refinancing, borrowers and lenders can negotiate a new term, which can either shorten or extend the remaining term based on agreed conditions. ### What would be the primary reason to consider extending the remaining term during a loan modification? - [x] Lower monthly payments - [ ] Save on interest over time - [ ] Pay off the loan faster - [ ] Increase the loan balance > **Explanation:** Extending the remaining term lowers monthly payments because the debt is spread out over a longer period. ### In scenario planning, why might a borrower be interested in the remaining term if they’re considering an early payoff? - [ ] To find a new interest rate - [ ] To calculate annual bonuses - [x] To understand how many payments are left and the interest savings - [ ] To check their credit score > **Explanation:** Knowing the remaining term helps a borrower calculate total remaining payments and the potential interest savings by paying off the loan early. ### Which amortization method allows for paying more towards the principal early in the loan term? - [ ] Interest splitting - [ ] Deferred interest - [x] Accelerated amortization - [ ] Step-up loan > **Explanation:** Accelerated amortization allows for higher principal payments early on, reducing the term and interest payable. ### On a typical 30-year mortgage, what is often noticed about the remaining principal and interest payments in the amortization schedule as nearing the final years? - [ ] The interest component increases - [ ] The remaining term stops changing - [x] Principal payments are higher than interest payments - [ ] Interest and principal payments split evenly > **Explanation:** In a fully amortizing loan like a 30-year mortgage, earlier payments are mostly interest, and over time, the principal portion increases as interest drops. ### What is a key benefit of a shorter loan term with respect to equity? - [x] More rapid build-up of home equity - [ ] Slower build-up of home equity - [ ] Equity remains unchanged - [ ] Easier tax deductions > **Explanation:** A shorter loan term means principal is repaid faster, and equity in the home builds more quickly. ### Could a borrower reset their amortization schedule to an earlier point without paying potentially hefty penalties or fees? - [x] Through refinancing or modifying the loan - [ ] By skipping payments - [ ] By adjusting monthly payment amounts at will - [ ] Changing the original loan type > **Explanation:** Refinancing or seeking a loan modification can potentially reset the amortization schedule, impacting the remaining term. ### Would market interest rates impact the ability to reduce the remaining term on a fixed-rate loan? - [x] No - [ ] Yes > **Explanation:** A fixed-rate loan’s interest rate doesn’t change with market conditions, so extra payments reduce the term regardless of prevailing rates. ### When making a lump sum towards a loan, borrowers should consult lender policies primarily to understand: - [x] Prepayment penalties - [ ] New interest calculations - [ ] Flexibility in further payments - [ ] Loan origination fees > **Explanation:** Some loans have prepayment penalties that could offset the benefits of making large lump-sum payments towards reducing the remaining term. ### With compound interest and a long-term loan, why might additional payments save more money? - [x] Interest compounding is based on the principal - [ ] Paying early increases accrued interest - [ ] No difference unless negotiated in loan terms - [ ] Early payments compound new interests > **Explanation:** Compounding interest builds on the principal, so lowering the principal faster reduces overall interest accumulated over time. ### What calculation model shows the impact of additional principal payments on the remaining term? - [ ] Balloon model - [x] Amortization schedule - [ ] Budget forecasting - [ ] Deferred payment model > **Explanation:** An amortization schedule details the effects of additional principal payments on the remaining term and interest savings. ### How does loan amortization inherently affect the loan’s remaining term each month? - [x] Regular payments reduce both principal & interest - [ ] Principal remains the same, interest changes monthly - [ ] Loan balance resets every year - [ ] Initially impacts interest, moving to full principal reduction late > **Explanation:** Regular payments on an amortized loan reduce both interest and principal each month, naturally lowering the remaining term. ### After several years of making monthly payments, how can a borrower predict the remaining term effectively? - [ ] By checking credit reports regularly - [ ] Using initial loan agreement calculations - [x] Reviewing an updated amortization schedule - [ ] Increasing future payment amounts > **Explanation:** An updated amortization schedule provides detailed insights into the impact of past payments and the current remaining term. ### Why would biweekly payments compared to monthly payments accelerate the reduction of the remaining term? - [ ] Lower interest rates are applied - [ ] Payments skipped are accumulated for the end of the loan - [x] They lead to one extra payment per year - [ ] Monthly penalties are applied less frequently > **Explanation:** Biweekly payments mean 26 payments annually, the equivalent of 13 monthly payments, which results in faster principal reduction. ### Should a borrower maintaining their standard payments along with occasional lump sums request recalculations for their amortization schedule? - [x] Yes - [ ] No > **Explanation:** To precisely understand the impact on their remaining term and interest, recalculating with the new payments ensures accurate tracking. ### If a loan term is due in 15 years, but the returns show that payments balance the loan in 12, what primarily affected this change? - [ ] Reduction in initial principal - [x] Additional payments made towards the principal