Which Mortgage Option Is Best in the Following Scenario

question 29

Multiple Choice

Which mortgage option is best in the following scenario.The Jones are purchasing their first home for $250000 and financing with a $200000 mortgage.They expect interest rates to stay the same for the next five years and have no prospects for any increase in their incomes.The prime rate is three percent.

• A)A five-year closed mortgage at five and a half percent
• B)A four-year closed mortgage at five and a half percent
• C)A five-year open VRM at prime plus three percent
• D)A two-year open convertible VRM at prime plus three percent

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Definitions:

Uniform Commercial Code

A comprehensive set of laws governing all commercial transactions in the United States, intended to harmonize the law in sales and other commercial transactions across states.

Assignment

The conveyance of entitlements, properties, or liabilities from one party to a different one.

Delegation

The act of assigning responsibility or authority from one person to another.

Donee Beneficiary

A third party who benefits from a contract made between two other parties, specifically where the intent is to gift a benefit or rights under the contract to the third party.