Exam 4: Fixed Interest Rate Mortgage Loans

Origination fees are tax deductible as an interest expense.

Which one of the following is TRUE about Prepayment penalties:

Demand for a mortgage loan is considered:

A borrower takes out a 30-year mortgage loan for $100,000 with an interest rate of 6% plus 4 points. What is the effective annual interest rate on the loan if the loan is carried for all 30 years?

Borrowers with fixed rate mortgages generally benefit if actual inflation is higher than expected inflation.

Because its payment stream looks like a staircase, which loan is sometimes referred to as "stepped-up" financing due to prearranged payment increases?

The annual percentage rate, disclosed at the loan closing, closely approximates the borrower's true cost of funds.

Prepayment penalties increase the lender's mortgage yield and discount points decrease it.

Which mortgage would a borrower prefer to have during inflationary and recessionary periods? Inflationary Recessionary

Risk is an important component of interest rates. Which of the following risks is NOT a determinant of interest rates?

A borrower obtains a $150,000 reverse mortgage with monthly payments over 10 years. If the interest rate of the mortgage loan is 8%, what is the monthly payment received by the borrower?

Which of the following closing costs do not increase the lender's effective loan yield?

Truth-in-lending requires the borrower to tell the truth on the loan application.

Assuming all APRs equal, the effective interest rate on a loan is highest when:

Over the life of the loan, which of the following loans would continually have a lower principal balance given each loan had the same term, principal amount, and average interest rate?

APR stands for which of the following?

Points are also known as:

With a reverse mortgage the borrower receives payments from the bank.

With every CPM, the effective costs of borrowing are higher than the stated rate of the loan.

Inflation makes very little difference to lenders of and investors needing money.