Finance
An adjustable-rate mortgage (ARM) in Montana is characterized by:
AA fixed interest rate for the life of the loan
BAn interest rate that adjusts periodically based on an index plus a margin✓ Correct
CGovernment backing by the FHA or VA
DA balloon payment required at the end of the first year
Explanation
An ARM has an interest rate that adjusts periodically—typically annually after an initial fixed period—based on a benchmark index (such as SOFR) plus a lender's 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.
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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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