Massachusetts Real Estate License Practice Test

A direct deduction mortgage is characterized by constant monthly payments of principal and interest throughout the life of the loan. This structure means that each payment is the same amount, allowing borrowers to budget effectively, as they know exactly how much they need to pay each month. In these loans, part of each payment goes toward reducing the principal amount borrowed, and the rest covers the interest charged on the remaining balance.

The other options refer to different types of mortgage structures. For instance, variable interest payments imply fluctuations in monthly payment amounts due to changing rates, which is not a feature of a direct deduction mortgage. Interest-only loans typically require borrowers to pay only the interest for a set period, which does not apply here either, since direct deduction mortgages involve both principal and interest in each payment. Lastly, a lump-sum payment refers to a balloon loan or similar type, which is not characteristic of direct deduction mortgages as these require consistent payments over time rather than a single payment at the end of the term.