Finance

In Hawaii, which type of mortgage protects the borrower against rising interest rates over the life of the loan?

AA. Adjustable-rate mortgage (ARM)

BB. Fixed-rate mortgage✓ Correct

CC. Interest-only mortgage

DD. Balloon mortgage

Explanation

A fixed-rate mortgage maintains the same interest rate for the entire loan term, protecting borrowers from rate increases over the life of the loan.

A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.

Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.

Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.

The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.

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