Finance
Which of the following is a characteristic of a fixed-rate mortgage in Rhode Island?
AThe interest rate adjusts annually based on market conditions
BThe monthly principal and interest payment remains constant for the life of the loan✓ Correct
CThe loan balance increases over time through negative amortization
DThe entire balance is due within five years
Explanation
A fixed-rate mortgage has an interest rate that remains constant throughout the loan term, resulting in a consistent monthly principal and interest payment that never changes.
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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.
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.
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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