Final answer:
The least expensive life insurance to pay off a 30-year mortgage balance is likely a decreasing term life insurance. This type of insurance aligns with the diminishing balance of the mortgage. Larger or extra payments towards the mortgage can save interest costs, and an adjustable-rate mortgage can lead to lower payments if inflation falls.
Step-by-step explanation:
The question is asking for the least expensive life insurance option to pay off a 30-year mortgage balance. The options given are different types of term life insurance policies. Among the options provided, decreasing term life insurance might be the most suitable for covering a mortgage because the coverage amount decreases over time, generally in line with the outstanding balance of the mortgage. As one makes mortgage payments, the balance owed decreases, and so does the need for a large death benefit.
The mortgage terms are set for significant periods, generally 15 or 30 years, and during this period, consistently making larger payments can significantly decrease the amount of interest paid over the life of the loan. For instance, by making a fraction of an extra payment each year, one can save both time and money on mortgage payments. To evaluate the exact savings potential, one might use an online mortgage calculator tool.
If a homeowner has an adjustable-rate mortgage (ARM) and inflation falls unexpectedly by 3%, the interest rate on their mortgage is likely to decrease as well, potentially lowering their monthly mortgage payments.