1.A variable rate mortgage means: a.The interest rate is not fixed b.The interes
ID: 2711544 • Letter: 1
Question
1.A variable rate mortgage means:
a.The interest rate is not fixed b.The interest rate is fixed for five years c.The rate is not subject to change d.Larger monthly payments than a fixed rate e.None of these
2.An amortization schedule shows:
a.Balance of interest outstanding b.The increase to principal c.Increase in loan outstanding
d.Portion of payment broken down to interest and principal e.None of these
3.Beverly Frost bought a home for $190,000 with a down payment of $19,000 at 7% for 25 years. Since then the rate has risen to 9%. How much more would her monthly payment be if she bought the house at 9%?
a.$208.97 b.$436.40 c.$143.00 d.$227.43 e.None of these
4.Daniel and Jan agreed to pay $560,000 for a four-bedroom colonial home in Waltham, Massachusetts, with a $60,000 down payment. They have a 30-year mortgage at a fixed rate of 6.00%.
How much is their monthly payment?
After the first payment, what would be the balance of the principal?
5.Rick Rueta purchased a $90,000 home at 9% for 30 years with a down payment of $20,000. His annual real estate tax is $1,800 along with an annual insurance premium of $960. Rick’s bank requires that his monthly payment include an escrow deposit for the tax and insurance. What is the total payment each month for Rick?
4.Daniel and Jan agreed to pay $560,000 for a four-bedroom colonial home in Waltham, Massachusetts, with a $60,000 down payment. They have a 30-year mortgage at a fixed rate of 6.00%.
How much is their monthly payment?
After the first payment, what would be the balance of the principal?
5.Rick Rueta purchased a $90,000 home at 9% for 30 years with a down payment of $20,000. His annual real estate tax is $1,800 along with an annual insurance premium of $960. Rick’s bank requires that his monthly payment include an escrow deposit for the tax and insurance. What is the total payment each month for Rick?
Explanation / Answer
Answer1.
Variable rate mortgage.
It is also referred to as the adjustable or a floating rate mortgage. As the name suggests it is a mortgage in which the interest rate is not fixed. As the interest rate changes, the new monthly payments are calculated on the changed interest rate.
The main characteristic of a variable interest rate mortgage is that in the long run the interest rates generally increase and as the interest rate increases, the value of the payments also increases.
Hence a variable rate mortgage means the interest rate is not fixed.
Therefore, the correct option is A.
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