Which statement is true of an adjustable rate mortgage?

a) Payments will adjust each year based on the amount of equity you have in your home

b) The interest rate will stay fixed for a period of time, then adjust either up or down based on an index

c) The interest rate can only change twice during the course of the loan

d) An adjustable rate mortgage always includes a balloon payment at the end of the 7th year

Question

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Isabela Rubio

1 June, 23:26

Which statement is true of an adjustable rate mortgage?

a) Payments will adjust each year based on the amount of equity you have in your home

b) The interest rate will stay fixed for a period of time, then adjust either up or down based on an index

c) The interest rate can only change twice during the course of the loan

d) An adjustable rate mortgage always includes a balloon payment at the end of the 7th year

+3

Answers (1)

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Adolfo Mccann · Answer 1

The answer is B. Adjustable rate mortgage is a mortgage loan where the interest rate stays for for a certain period of time then it changes either up or down based on an index. It is also called variable-rate mortgage or tracker mortgage. This type of mortgage loan permits a debtor to have a lower initial payment if and only if they agree to assume the risk of the changes in the interest rate.