Mortgages

Suppose you have a typical 30-year fixed mortgage on a home that costs $200,000; you've got a good credit score. While every mortgage is different, which statement below BEST describes the amount of interest you'll likely pay?

• As long as you pay off the mortgage within the 30-year time frame, you won't pay any interest.

• Your total interest will be approximately $15,000.

• Your total interest will be approximately $150,000.

• Your total interest will be approximately $400,000.

Which of the following might be a likely Adjustable Rate Mortgage offer that a new home buyer could receive from their bank?

• A fixed rate of 5.4% for a term of 15 years

• A fixed rate of 4.3% for a term of 5 years, which then adjusts yearly for the next 25 years

• A fixed rate of 0% for a term of 10 years, which then adjusts yearly for the next 20 years

• A fixed rate of 4.2% for a term of 7 years, which then adjusts weekly for the next 23 years

Which of the following will most likely affect the total amount of interest you will end up paying on a home loan?

• How many other homes in your neighborhood are also for sale

• The median cost of homes in your neighborhood

• Your credit score

• The type of car you drive

Which statement accurately describes the relationship between interest, payments, and amortization?

• With a typical fixed-rate mortgage amortization table, your house payments are higher at the beginning of the loan because you owe more in interest then. As you pay down the interest, your payment size decreases.

• With a typical fixed-rate mortgage amortization table, your house payments stay the same throughout the loan. As you pay down the loan, less goes towards interest and more towards the principal.

• With a typical fixed-rate mortgage amortization table, your house payments stay the same throughout the loan. As you pay down the loan, less goes towards interest and more towards the principal.

• With a typical fixed-rate mortgage amortization table, your house payments stay the same throughout the loan. As you pay down the loan, your interest rate and payment amount decreases.

Which statement accurately describes the terms of a 10/1 ARM with a term of 30 years?

• Your interest rate will stay the same for the first 10 years and then change once per year

• Your interest rate will stay the same for the first year of the loan and then change once every 10 years

• Your interest rate can only be adjusted once, but not until the 10th year of the loan

• Your interest rate can only be adjust 10 times, but not until the 1st year of the loan

Newton gets bored easily and likes to relocate to a new neighborhood or even a new city every 2-5 years. Which of the following would be the BEST use of his financial resources?

• Renting a home or apartment

• Buying a home using an adjustable-rate mortgage

• Buying a home using a fixed-rate mortgage

• Buying a home using an interest-only mortgage

Which of the following statements is TRUE?

• Most people would consider a fixed-rate mortgage to be riskier than an adjustable-rate mortgage.

• Most people would consider a fixed-rate mortgage to be less risky than an adjustable-rate mortgage.

• Regardless of your circumstances, you should always pick a fixed-rate mortgage over an adjustable rate mortgage.

• Regardless of your circumstances, you should always pick an adjustable rate mortgage over a fixed rate mortgage.

Denise buys a $100,000 condo using a $20,000 down payment on a 30-year fixed-rate loan. After 5 years of payments, she's made approximately $24,000 in payments and still owes approximately $75,000. How much equity does Denise have in her house?

• $100,000 because she owned all of the house as soon as she signed the mortgage papers.

• $20,000 because, until she pays off the house fully, Denise's down payment is her only equity.

• $44,000 because that's the total amount she's paid so far.

• $25,000 because she still owes $75,000.

Which of the following statements is TRUE regarding credit scores and interest rates?

• If you have a low credit score, your mortgage interest rate will be lower. If you have a high credit score, your mortgage interest rate will be lower.

• If you have a low credit score, your mortgage interest rate will be lower. If you have a high credit score, your mortgage interest rate will be higher.

• If you have a low credit score, your mortgage interest rate will be higher. If you have a high credit score, your mortgage interest rate will be lower.

• If you have a low credit score, your mortgage interest rate will be higher. If you have a high credit score, your mortgage interest rate will be higher.