Finance
An Alaska lender 'locks in' an interest rate for 45 days for a borrower. This rate lock:
AGuarantees the rate permanently regardless of market changes
BProtects the borrower from rate increases during the lock period if the loan closes within that time✓ Correct
CAllows the lender to change the rate at any time during the lock
DRequires the borrower to pay a penalty if the rate goes down
Explanation
A rate lock agreement guarantees the interest rate (and typically points and fees) for a specified period. If market rates rise during the lock period, the borrower is protected and still gets the locked rate.
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Key Terms to Know
Adjustable-Rate Mortgage (ARM)
A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Option ContractA contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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