How to decide between a fixed- vs. adjustable-rate mortgage (ARM

What does a fixed-rate mortgage offer?

• A rate that changes based on market trends

• A rate that stays the same for the life of the loan

• A rate that increases annually

• A rate that is determined by the prime rate

What is a characteristic of an adjustable-rate mortgage (ARM)?

• The interest rate is always higher than a fixed-rate mortgage

• The interest rate can change periodically after an initial period

• The interest rate remains constant over time

• The interest rate is set by the government

What is the initial period of a 5/1 ARM?

• 30 years

• 1 year

• 10 years

• 5 years

What does the 'margin' in an ARM refer to?

• The initial interest rate

• The amount of interest added to the index rate

• The maximum interest rate

• The minimum interest rate

What are rate caps in an ARM designed to do?

• Determine the loan term

• Set the initial interest rate

• Limit how much the interest rate can change

• Increase the interest rate annually

Why might someone choose a fixed-rate mortgage?

• They expect interest rates to decrease in the future

• They want the lowest possible rate at the start

• They plan to move before the initial rate period ends

• They prefer predictable payments over the loan term

What is a disadvantage of a fixed-rate mortgage compared to an ARM?

• Less predictability in payments

• Interest rate increases over time

• No rate caps

• Higher initial interest rates

What could be a benefit of choosing an ARM?

• No interest rate caps

• Guaranteed rate decrease

• Lower initial interest rate

• Fixed interest rate for 30 years

What is a potential risk of an ARM?

• The interest rate could decrease significantly

• The loan term is shorter than fixed-rate mortgages

• The interest rate is fixed for the loan term

• Monthly payments could increase when the rate adjusts

What is the main advantage of a fixed-rate mortgage over an ARM?

• Shorter loan terms

• The ability to change interest rates based on market trends

• The interest rate and monthly payments stay the same for the life of the loan

• Lower initial payments