types of mortgages
types of mortgages - correct answer -Fixed rate
-Adjustable Rate
-Graduated Payment
-Growing Equity
-Second Mortgage
-shared appreciation
-balloon payment
fixed rate mortgage - correct answer locks in the borrowers interest rate over the life of the mortgage
-a financial institution holding mortgage is exposed to interest rate risk
-borrowers with fixed rate mortgages do not suffer from rising rates
-not not benefit from declining rates
adjustable rate mortgages (ARM) - correct answer allows the mortgage interest rate to adjust to mkt
conditions
-contract will specify a precise formula for this adjustment
-some arms contain a clause that allow the borrower to switch to a fixed rate within specified period
graduated payment mortgages GPM - correct answer borrower can make small payments initially on
the mortgage
-the payments gradually increase (first 5-10 years) then levels off
growing equity mortgages - correct answer monthly payments are initially low and increase over time
-payments never level off but continue to increase
Second mortgages - correct answer can be used in conjunction with primary or first mortgage
