Which of the following is true about fixed and adjustable-rate mortgages?

A. Fixed-rate mortgages have a constant interest rate throughout the life of the loan.
B. Adjustable-rate mortgages have interest rates that may change periodically.
C. Fixed-rate mortgages typically offer more predictability in monthly payments.
D. Adjustable-rate mortgages might start with a lower initial rate compared to fixed-rate mortgages.

Question

06-07-2024
Business

Answered

Which of the following is true about fixed and adjustable-rate mortgages?

A. Fixed-rate mortgages have a constant interest rate throughout the life of the loan.
B. Adjustable-rate mortgages have interest rates that may change periodically.
C. Fixed-rate mortgages typically offer more predictability in monthly payments.
D. Adjustable-rate mortgages might start with a lower initial rate compared to fixed-rate mortgages.

Answer :

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GinnyAnswer GinnyAnswer · Answer 1 · 2024-07-06T16:38:57-04:00

Final answer:

Fixed-rate mortgages have a constant interest rate, while adjustable-rate mortgages fluctuate with market rates. A decrease in inflation may lead to a lower interest rate for homeowners with adjustable-rate mortgages.

Explanation:

Fixed-rate mortgages maintain the same interest rate throughout the loan term, while adjustable-rate mortgages change based on market rates. If inflation decreases by 3%, a homeowner with an adjustable-rate mortgage may see a reduction in their interest rate to align with inflation, keeping the real interest rate constant.

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