The best description of the borrowers preference would be: c The borrower would be indifferent between the two mortgages.
What would the borrower want
This preference is based on several factors:
Total Interest Paid: A 15-year mortgage typically carries a lower interest rate compared to a 30-year mortgage. As a result, the total interest paid over the loan's life is substantially lower for the 15-year mortgage.
Faster Equity Building: With higher monthly payments, the borrower builds equity faster with a 15-year mortgage due to more substantial principal payments.
Shorter Loan Term: Choosing the 15-year mortgage allows the borrower to pay off the loan in a shorter period, becoming debt-free sooner and potentially saving more on interest.
question
Assume that a borrower has a choice between two comparable fixed-rate mortgage loans with the same interest rate, but different mortgage terms, one being a 30-year mortgage and the other a 15-year mortgage. Under financially unconstrained circumstances, which of the following statements best describes the borrower's preference?
A. The borrower would prefer the 30-year mortgage.
B. The borrower would prefer the 15-year mortgage.
C. The borrower would be indifferent between the two mortgages.
D. The borrower is unable to compare mortgage loans of two different maturities.