Which of the following best describes a fixed-rate mortgage?
Correct Answer
B) It has an interest rate that remains constant for the life of the loan
A fixed-rate mortgage has an interest rate that remains constant for the entire life of the loan, resulting in predictable monthly principal and interest payments regardless of market fluctuations. This stability makes budgeting easier for borrowers. While fixed-rate mortgages may have higher initial rates than adjustable-rate mortgages (ARMs), they protect borrowers from rising interest rates over time.
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Related Topics & Key Terms
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Key Terms:
Related Concepts
TILA is a federal law that requires lenders to disclose the true cost of credit to borrowers, including the annual percentage rate (APR), total finance charges, and loan terms. It is implemented by Regulation Z.
A trustee sale is a type of foreclosure where a trustee, appointed under a deed of trust, sells the property at auction to satisfy the debt.
Usury is the practice of charging an interest rate that exceeds the maximum rate permitted by state law. Usury laws protect borrowers from excessive interest charges on loans.
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