You Have an Option on an ARM That Has a Two-Year

question 140

Multiple Choice

You have an option on an ARM that has a two-year adjustment interval,4% margin,2% periodic rate cap and a 6% lifetime cap.The current initial rate is 5.35%.You can also get a 30-year,fixed-rate mortgage for 6.65%.You plan on staying in this home for at least 10 years.What would be your best choice?

• A)Probably the ARM loan since your PITI would be lower.
• B)Probably the ARM loan since your PITI would be lower and the market rates of interest could get lower.
• C)Probably the fixed-rate loan because your PITI will be lower.
• D)Probably the fixed-rate loan because it is easier to budget for and it is less risky for you.

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Definitions:

Intrinsic Motivation

The drive to act or engage in an activity for its own sake, deriving pleasure or satisfaction from the activity itself rather than external rewards.

Adequate Resources

Having sufficient means, materials, or assets required to achieve a goal or fulfill a need.

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A term used to describe a scenario that is intimidating or appears difficult to deal with or overcome.

Challenge

A task or situation that requires a person to use their skills and efforts to overcome difficulties.