Final answer:
Buyers assuming mortgages are liable for the debt if they default but usually don't pay a premium or extra for discount points. The benefit of borrowing or lending money for a mortgage depends on the relative rates of interest and inflation. The 20% down payment rule can avoid additional costs like mortgage insurance, although lower down payment options exist. The correct option is d. must pay more for discount points at closing.
Step-by-step explanation:
Buyers who assume mortgages could be personally liable to repay the debt in the event of a default. When assuming a mortgage, the borrower takes over the obligation to repay the remaining balance on the loan according to the original terms, essentially stepping into the shoes of the original borrower. This process does not usually involve paying a 30% premium or additional amounts for discount points at closing. Instead, the buyer takes over the existing rate and terms.
In terms of mortgage interest rates and inflation, it would be better for a person borrowing money from a bank to buy a home when interest rates are low compared to the rate of inflation. Conversely, a bank would benefit more in years when the mortgage interest rate is higher than the current rate of inflation because the value of the repayments received will be more significant in terms of purchasing power.
The 20% rule is often recommended as it can help avoid mortgage insurance premiums which increase the overall cost of a loan. However, not all buyers are able to save such a sizable down payment, and substitutes like lower down payment options, though they come at the cost of requiring mortgage insurance, are available. These lower down payments and the fees associated with mortgage insurance can influence a buyer's decision to take a loan as well.