Certified Apartment Portfolio Supervisor (CAPS) Practice Exam - Module 2

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What is a fixed-rate mortgage?

  1. Promotes variable payments based on interest rates

  2. Requires balloon payments at the end

  3. Involves level payments over a set term

  4. Often includes adjustable-rate features

The correct answer is: Involves level payments over a set term

A fixed-rate mortgage is characterized by its structure that involves level payments over a set term. This means that the interest rate remains constant throughout the life of the loan, resulting in consistent monthly payments that do not fluctuate with market changes. This stability allows borrowers to plan their finances better, as they know exactly how much they need to pay each month until the mortgage is paid off. The predictability of these payments is a significant advantage for many homeowners, making it easier for them to budget for their expenses. In contrast to other types of mortgages, a fixed-rate mortgage does not incorporate variability; this clarity and simplicity in financial planning are highly valued by borrowers.

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