Finance
What is the primary difference between a fixed-rate and adjustable-rate mortgage from a risk perspective?
AFixed-rate is riskier for the lender; ARM is riskier for the borrower✓ Correct
BARM is riskier for the lender; fixed-rate is riskier for the borrower
CFixed-rate is riskier for the borrower; ARM transfers rate risk to the lender
DThere is no difference in risk allocation
Explanation
A fixed-rate mortgage transfers the interest rate risk to the lender (who is locked into the rate even if market rates rise). An ARM transfers rate risk to the borrower (whose payment can increase as rates rise).
Related Arizona Finance Questions
- An Arizona homebuyer who is a veteran with a 100% service-connected disability is exempt from paying:
- Private Mortgage Insurance (PMI) is typically required when a conventional loan's loan-to-value ratio (LTV) exceeds:
- An Arizona lender must provide a Closing Disclosure to a borrower at least how many business days before closing?
- In Arizona, a deed of trust involves how many parties?
- The primary security instrument used in Arizona real estate transactions is:
- Under a deed of trust in Arizona, who holds legal title to the property during the loan period?
- The Equal Credit Opportunity Act (ECOA) prohibits lenders from discriminating in lending based on all EXCEPT:
- A 'lock-in' in Arizona mortgage lending means:
Practice More Arizona Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Arizona Quiz →