Finance
Which type of mortgage allows the interest rate to remain fixed for an initial period, then adjusts annually based on a market index?
AFixed-rate mortgage
BBalloon mortgage
CHybrid adjustable-rate mortgage (ARM)✓ Correct
DReverse mortgage
Explanation
A hybrid ARM has a fixed interest rate for an initial period (e.g., 5, 7, or 10 years) and then converts to an adjustable rate that resets periodically based on a market index plus the lender's margin. Common examples are 5/1 ARMs and 7/1 ARMs.
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