Final answer:
The statement is false; both 15- and 30-year loans are common fixed-rate mortgage options. The differences between them include the interest rates and total amount of interest paid, with 15-year loans generally offering lower rates and 30-year loans having lower monthly payments.
Step-by-step explanation:
False, the statement that 15-year loans are considered standard, conventional loans is not entirely accurate. Both 15-year and 30-year loans are common options for a fixed-rate mortgage, and there is no single standard that dictates one term length over the other.
When choosing between a 15-year and a 30-year mortgage, one should consider factors such as monthly payment affordability and long-term financial goals.
The pros and cons of these mortgage terms vary. A 15-year mortgage typically offers lower interest rates and will save on the total interest paid over the life of the loan but comes with higher monthly payments.
A 30-year mortgage, on the other hand, has lower monthly payments which can be easier on your budget but results in more interest paid throughout the loan period.
Regarding a homeowner with an adjustable-rate mortgage (ARM), if inflation falls unexpectedly by 3%, the homeowner might see a decrease in their interest rate.
This is because ARMs are often influenced by prevailing market interest rates, which are correlated with inflation rates. If the market interest rates drop in response to a decrease in inflation, the interest rate on an ARM would likely adjust downward, potentially lowering the homeowner's monthly payments.