Mortgages

What incentive do banks have for lending money to homebuyers?

• They expect homebuyers to default on their loans

• They expect to profit from the interest of the loans

• They expect to profit as the val of the home rises

• They expect to profit when the home buyer sells her house

Mortgages with shorter terms have higher monthly payments. Why would anyone want a short-term mortgages?

• You pay less in principal in total

• You pay less interest in total

• You pay less in property taxes in total

• You pay less in insurance and processing fees

Tim describes a mortgage as an investment. What is an investment?

• A kind of loan with high interest

• A way to acquire property

• A way to buy things in monthly installments

• A way to grow your money over time

If you are unable to repay your mortgage, what is the most likely result?

• The bank might sell your home to recover its investment

• You might have to go to prison

• The bank might force you to take out an additional loan

• The bank might take all they money and goods you own

Which of the following will a bank consider in its decision to approve you for a mortgage?

• Your ethnic background

• Your religion

• Your salary

• Your hobbies

If you have a mortgage with a 20-year terms, how many payments will you probably have to make?

• 20

• 200

• 240

• 360

What can you infer from the fact that banks require a down payment on a mortgage?

• They want to increase the amount of money they loan

• They want to make sure the borrower will not walk away from the loan

• They want to increase they amount of interest on the loan

• They want to get their hands on as much cash as possible

What is one of the advantages to making a larger down payment?

• You will need a smaller loan

• You will need a bigger loan

• You will need a higher interest rate

• You will need a lower intererest rate

If, one month, you decide to pay your bank more than the amount you owe on a fixed 30-year mortgage, how would this affect your loan?

• It would decrease the time you have left before your morgage is paid off

• It would decrease the amount of money you owe to your bank each month

• It would decrease the amount of interest you owe on the following month's payment

• It would increase the amount of principal you owe to the bank each month

What is the most likely reason for borrowers to default on a mortgage?

• They can't afford the down payment

• They find another house they like better

• They've built up enough equity to sell the house

• They can no longer afford the monthly payments