Question

The borrower does not repay any principal, but remits interest payments at regular, specified intervals. The principal amount is due at the end of the mortgage term. Interest only mortgages are sometimes used in short-term private or interim financing to avoid complex interest calculations.

A. Interest-only mortgage
B. Fixed-rate mortgage
C. Adjustable-rate mortgage (ARM)
D. Open mortgage

Answer 1

An adjustable-rate mortgage (ARM) is a type of loan used to purchase a home in which the interest rate varies with the rate of inflation. If inflation falls unexpectedly by 3%, a homeowner with an ARM would likely experience a decrease in their interest rate and monthly mortgage payments.

Step-by-step explanation:

An adjustable-rate mortgage (ARM) is a type of loan used to purchase a home in which the interest rate varies with the rate of inflation. Unlike a fixed-rate mortgage where the interest rate remains the same for the entire term, with an ARM the interest rate changes periodically based on market interest rates.

If inflation falls unexpectedly by 3%, a homeowner with an adjustable-rate mortgage would likely experience a decrease in their interest rate. This means that the homeowner's monthly mortgage payments would also decrease, providing them with some financial relief.