Finance
A Missouri homeowner who refinances their mortgage primarily to get a lower interest rate is engaging in:
AA cash-out refinance
BA rate-and-term refinance✓ Correct
CA reverse mortgage
DA wraparound mortgage
Explanation
A rate-and-term refinance replaces an existing mortgage with a new one at a lower interest rate and/or different term, without extracting equity. A cash-out refinance increases the loan balance to provide the borrower with cash.
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Key Terms to Know
Discount Points
Prepaid 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.
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.
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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