Finance
An adjustable-rate mortgage (ARM) in Maine is characterized by:
AA fixed interest rate for the life of the loan
BInterest rates that change periodically based on a benchmark index✓ Correct
CMonthly payments that never change
DA government guarantee of the interest rate
Explanation
An ARM has an interest rate that adjusts periodically based on a designated index (such as SOFR), subject to caps on how much the rate can change per period and over the life of the loan.
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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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