chap 10 d - market-determined interest rate • Advantage...

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Characteristics of a Fixed-Rate Mortgage Estimating the monthly mortgage payment Some lenders are now offering 40 and 50 year mortgages Many mortgage loan Web sites offer mortgage calculators to estimate monthly payments based on a specific mortgage amount, interest rate, and maturity Financial Planning Online: Estimating Mortgage Payments Go to: http://www.bloomberg.com/invest/calculators/mortgage.html This Web site provides the monthly payment on a mortgage based on the loan amount, interest rate, and the loan maturity Financial Planning Online: Should You Obtain a Fixed- or an Adjustable-Rate Mortgage? Go to: http://www.federalreserve.gov/pubs/ arms/arms_english.htm This Web site provides valuable information regarding adjustable-rate mortgages that may be useful when deciding whether to finance with a fixed-or adjustable-rate mortgage Characteristics of an Adjustable-Rate Mortgage Adjustable-rate mortgage (ARM): a mortgage where the interest owed changes in response to movements in a specific
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: market-determined interest rate • Advantage is that rates could go down; disadvantage is that rates could increase • Initial rate—usually relatively low • Interest rate index—determines whether mortgage rate goes up • Frequency of rate adjustments—varies • Characteristics of an Adjustable-Rate Mortgage (cont’d) • Frequency of rate adjustments • Specified in mortgage contract • Many alternatives available from once a year to every five years • Make sure you can afford the monthly payments if interest rates increase • Characteristics of an Adjustable-Rate Mortgage (cont’d) • Caps on adjustable rate mortgages • Caps: maximum and minimum fluctuations in the interest rate on an ARM • Limits the fluctuations in interest rate • Financing with a fixed- versus an adjustable-rate mortgage • Depends on your expectation of future interest rates...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern