What is a major characteristic of a straight note?

A straight note, also known as an interest-only note, is defined primarily by its payment structure. The significant characteristic of a straight note is that it only requires interest payments over the life of the loan, with the principal being repaid in a lump sum at the end of the term. This structure can benefit borrowers who may not want to pay down the principal during the term, allowing them to manage their cash flow more effectively.

In contrast, options such as requiring bi-weekly payments or having a fixed repayment schedule do not apply to a straight note. These features are more typical of amortizing loans where borrowers pay both interest and principal in regular intervals, contributing to gradual loan payoff. The option regarding conversion to an ARM (adjustable-rate mortgage) is also not characteristic of a straight note, as there is no inherent flexibility to switch to another type of mortgage within the structure of what a straight note provides. Therefore, the defining feature of a straight note lies in the fact that it only requires interest payments during its term.