Understanding Mortgage Concepts and Terms

What does the Annual Percentage Rate (APR) on a loan represent?

• Only the interest rate charged by the lender.

• The total amount of money borrowed, excluding interest.

• A combination of the interest rate and additional costs like fees, taxes, and insurance.

• The maximum amount of money you can borrow.

Which statement accurately describes the difference between fixed-rate and adjustable-rate mortgages?

• Fixed-rate mortgages have unpredictable monthly payments, while adjustable-rate mortgages have stable payments.

• Adjustable-rate mortgages are generally riskier because their interest rates can change over time.

• Fixed-rate mortgages always have lower overall interest than adjustable-rate mortgages.

• Adjustable-rate mortgages are only available for short-term loans.

What personal factors should be considered when deciding between different mortgage options?

• Only the current interest rates offered by various lenders.

• Your income, future plans, how long you expect to live in the home, and your tolerance for financial risk.

• The color of the house and the number of rooms.

• The lender's advertising campaigns and celebrity endorsements.

How does the allocation of monthly mortgage payments between interest and principal typically change over the life of a fixed-rate loan?

• More of the payment goes towards principal at the beginning, and more towards interest at the end.

• The amount going to interest and principal remains constant throughout the loan term.

• More of the payment goes towards interest at the beginning, and more towards principal at the end.

• Payments only cover interest for the first half of the loan, then switch to principal.