Key Questions for Mortgage Decisions

The video tutorial explains the concept of mortgages, focusing on the importance of understanding APR, the differences between fixed-rate and adjustable-rate mortgages, and how amortization affects loan repayment. It emphasizes the need for financial literacy to avoid pitfalls in mortgage commitments.

What does APR stand for?

(a)  

What is the primary component of the APR?

• The interest rate plus additional costs

• The loan's principal amount

• The loan's term

• The down payment amount

Which type of mortgage rate remains the same throughout the loan term?

• Variable-rate mortgage

• Adjustable-rate mortgage

• Index-rate mortgage

• Fixed-rate mortgage

What is a key advantage of fixed-rate mortgages?

What is the risk associated with adjustable-rate mortgages?

• Stable interest rates

• Increasing interest rates

• Decreasing property value

• Fixed monthly payments

What factor does not directly affect your choice between a fixed-rate and an adjustable-rate mortgage?

• How long you plan to live in the home

• Your future income

• Your financial risk tolerance

• The property's location

What does an amortization schedule show?

• The total interest paid over the loan term

• The decrease in property value over time

• How each payment is split between interest and principal

• The increase in property value over time

What happens to the interest portion of a mortgage payment over time?

• It decreases

• It fluctuates based on the economy

• It stays the same

• It increases

Why is it important to understand mortgage terms before signing? Explain in three sentences.