A borrower has a 5/1 ARM that will adjust from 3.5% to 6.5% next month. They want to refinance to a 30-year fixed-rate mortgage at 5.0%. The closing costs are $8,000. How should the MLO evaluate tangible net benefit?
Correct Answer
C) Calculate the total cost over the remaining loan term including future ARM adjustments
For ARM-to-fixed refinances, tangible net benefit should consider the total cost over the remaining loan term, including reasonably foreseeable ARM rate adjustments, not just the current or initial ARM rate.
Why This Is the Correct Answer
For ARM-to-fixed refinances, tangible net benefit should consider the total cost over the remaining loan term, including reasonably foreseeable ARM rate adjustments, not just the current or initial ARM rate.
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