Finance
In Indiana, a mortgage that has a fixed rate for the first 5 years and then adjusts annually is known as a:
A5/1 ARM✓ Correct
BBalloon mortgage
CGrowing equity mortgage
DReverse mortgage
Explanation
A 5/1 ARM (Adjustable Rate Mortgage) has a fixed interest rate for the first 5 years, after which it adjusts once per year based on the index and margin.
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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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Math Concepts
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