Question

A mortgage in which the rate of interest does not change throughout the term of the loan. The amount of principal and interest paid each month in a blended payment may vary, but the total payment remains the same. The standard blended mortgage is called a 'fixed mortgage' because a blended principal and interest payment is fixed throughout the term.

A. Fixed-rate mortgage
B. Adjustable-rate mortgage
C. Interest-only mortgage
D. Balloon mortgage

Answer 1

A fixed-rate mortgage is a mortgage in which the interest rate remains the same throughout the term of the loan. This means that the borrower's monthly mortgage payment will also remain the same, even though the amount of principal and interest paid each month may vary.

Step-by-step explanation:

A fixed-rate mortgage is a mortgage in which the interest rate remains the same throughout the term of the loan. This means that the borrower's monthly mortgage payment will also remain the same, even though the amount of principal and interest paid each month may vary. In contrast, an adjustable-rate mortgage (ARM) has an interest rate that can change over time based on market interest rates.

For example, if a homeowner has an adjustable-rate mortgage and inflation falls unexpectedly by 3%, it would likely result in a decrease in market interest rates. As a result, the homeowner's interest rate may decrease, leading to a lower monthly mortgage payment. However, it's important to note that the specific terms and conditions of an adjustable-rate mortgage can vary, so the impact of a decrease in inflation on a homeowner's mortgage would depend on the specific terms of their loan.