Finance
A Wisconsin homeowner refinances their mortgage to obtain a lower interest rate. The primary benefit is:
AIncreasing the loan balance
BReducing monthly payments and/or total interest paid over the life of the loan✓ Correct
CEliminating the need for title insurance
DConverting a fixed-rate loan to a variable rate
Explanation
Refinancing to a lower interest rate reduces the borrower's monthly payment and/or total interest paid over the life of the loan, potentially saving significant money over time.
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Key Terms to Know
Title Insurance
Insurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.
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.
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.
Math Concepts
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