Finance
A Massachusetts borrower obtains a $400,000 mortgage at 6.5% annual interest. What is the monthly interest for the first payment?
A$2,166.67✓ Correct
B$2,600.00
C$2,000.00
D$3,250.00
Explanation
Monthly interest = $400,000 × (6.5% ÷ 12) = $400,000 × 0.
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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.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
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.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
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