Finance
A borrower in Ohio wants to refinance their current mortgage. The primary benefit of refinancing is typically to:
AIncrease the remaining loan balance
BObtain a lower interest rate, reduce monthly payments, or access equity✓ Correct
CAdd more co-borrowers to the loan
DChange the property's title
Explanation
Borrowers refinance to obtain a lower interest rate (reducing payments or saving interest), change the loan term, or convert equity to cash through a cash-out refinance.
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Key Terms to Know
Amortization
The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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.
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.
Math Concepts
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