Question

An adjustable rate mortgage originator is adversely affected by _______ interest rates while the borrower is adversely affected by _______ interest rates. Multiple Choice increasing; decreasing increasing; increasing decreasing; decreasing decreasing; increasing stable; decreasing

Answer 1

Answer:

DECREASING interest rates affects the originator while INCREASING rates affects the borrower.

Explanation:

An Adjustable Rate Mortgage (ARM) is a loan with an interest rate that changes or varies.

The ARMs may start with lower monthly payments than fixed-rate mortgages, but know that Your monthly payments could change. It may not go down or it will just go down a little even if interest rates go down.

An Adjustable interest mortgage is a loan whose interest rate is not steady or the same. Its interest rate is adjustable.

It is characterized by frequent changes of the interest rate,

A periodic change in interest rate. and a total change in interest rate over the life of the loan, sometimes called life cap.

An adjustable rate mortgage transfers all the risk from the lender to the borrower.

The Advantage of a 30-year fixed rate mortgage is that it is an almost risk-free mortgage. And even though an adjustable rate mortgage may carry a lower initial rate, it's almost certain that the rate will rise at some point in the future. You can buy a very expensive house, and it feels as though you paid almost nothing for it.