Decoding Mortgage Interest Rates

What is a mortgage?

• A type of insurance

• A method of calculating interest

• A loan secured by a house

• A type of savings account

What happens if you don't pay off your mortgage?

• You can refinance the loan

• You can extend the loan term

• You get a higher interest rate

• The bank can take your house

In a 30-year fixed mortgage, what remains constant?

• The loan amount

• The down payment

• The interest rate and monthly payment

• The principal amount

How does the monthly payment of a 15-year fixed mortgage compare to a 30-year fixed mortgage for the same loan amount?

• It is lower

• It is higher

• It is the same

• It varies each month

What does ARM stand for?

• Average Rate Mortgage

• Annual Rate Mortgage

• Amortized Rate Mortgage

• Adjustable Rate Mortgage

In a 5/1 ARM, what does the '5' represent?

• The monthly payment

• The loan term in years

• The number of years the rate is fixed

• The interest rate

What happens to the interest rate after the fixed period in a 5/1 ARM?

• It remains the same

• It changes according to an index

• It decreases

• It is recalculated based on the loan amount

What is a potential risk of an adjustable rate mortgage?

• Lower initial interest rates

• Unpredictable future payments

• Decreasing interest rates

• Fixed monthly payments

Why do banks charge higher interest rates for 30-year fixed mortgages compared to ARMs?

• Because they are less risky

• Because they are more risky

• Because they have shorter terms

• Because they have lower down payments

What is crucial to do before taking out a mortgage loan?

• Read the fine details of the loan

• Ignore the loan details

• Opt for the longest loan term available

• Choose the loan with the highest interest rate