Final answer:
Betty is the borrower of a $327,000 mortgage over 30 years. To determine when it is better to be a borrower or lender, compare mortgage interest rates to inflation rates; borrowers benefit when the interest rate is below inflation. The concept of equity is key in the financial outcomes for homeowners.
Step-by-step explanation:
Betty obtained a $327,000 mortgage for a term of 30 years. She is the borrower in this scenario. A mortgage loan is a type of loan specifically used for purchasing real estate, typically a home. The mortgage is secured by the property itself, meaning if the borrower fails to make payments, the lender has the right to take possession of the property through a process called foreclosure.
When it comes to analyzing whether it's better to be a borrower or a lender in different years based on mortgage interest rates and inflation, one must look at the relative rates. If the mortgage interest rates are lower than the rate of inflation, it is generally better to be a borrower, because the real value of the money being repaid diminishes over time due to inflation. Conversely, if the mortgage interest rates are higher than the rate of inflation, it benefits the lender more as they receive more in real terms compared to the inflation rate.
In the examples given about various individuals purchasing homes, each scenario demonstrates different aspects of homeownership and financing. Equity growth, the difference in the home's value versus how much is owed on it, plays a significant role in the financial benefit to the homeowner.