4 Questions
Which one of the following best describes the difference between an annual percentage rate (APR) for mortgages and a more traditional interest rate?
The APR includes both the interest rate and additional fees, while the traditional interest rate only includes the interest charged on the loan.
Why is an adjustable-rate mortgage considered riskier than a fixed-rate mortgage?
Adjustable-rate mortgages have fluctuating interest rates, which can lead to unpredictable monthly mortgage payments.
Should the borrower be worried that they'll never pay off the mortgage if $375 goes toward paying interest and $336 goes toward paying the principal?
No, because the borrower is making regular payments that contribute to both the interest and principal.
Why is choosing an appropriate mortgage potentially even more important than choosing an appropriate auto loan?
Mortgages have longer loan terms, resulting in higher overall interest paid compared to auto loans.
Test your knowledge on mortgage terms and concepts with this quiz! Learn about the differences between annual percentage rate (APR) and traditional interest rates, the risks associated with adjustable-rate mortgages, and understand the breakdown of mortgage payments.
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