Question

An investor obtained a fully amortizing mortgage five years ago for $95,200 at 11 percent for 30 years. Mortgage rates have dropped, so that a fully amortizing 25-year loan can be obtained at a lower interest rate. The investor is now considering refinancing the existing mortgage with the new loan to take advantage of the lower interest rate and potentially reduce monthly payments. To make an informed decision, the investor should compare the total cost of the remaining payments on the current mortgage with the cost of the new 25-year loan, taking into account any refinancing fees or closing costs associated with the new loan.

Answer 1

When inflation falls unexpectedly by 3%, homeowners with adjustable-rate mortgages (ARMs) may benefit from lower interest rates and potentially lower mortgage payments.

Step-by-step explanation:

The subject of this question is Business and it is suitable for High School level students.

When inflation falls unexpectedly by 3%, homeowners with adjustable-rate mortgages (ARMs) may benefit. This is because the interest rate on ARMs is often tied to a specific index, such as the LIBOR or Treasury rates, which can vary with market conditions. When inflation falls, it often leads to lower interest rates, which could result in lower monthly mortgage payments for homeowners with ARMs.

However, it's important to note that the specific terms of the ARM, including the adjustment frequency and interest rate cap, will determine the extent of the impact. Homeowners should consult with their lenders to fully understand how changes in inflation may affect their mortgage payments.