If the loan is fully paid and the borrower re-applies, the rate to be used will...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
If the loan is fully paid and the borrower re-applies, the rate to be used will be the prevailing prime rate at the time of the 2nd loan release. Many banks offer both types of rates? Some only offer the variable rate, which is the safest for banks. What is the best? Any answer will be speculative. No one can predict the future. There are many factors to take into account: PREVAILING RATES, STATE OF THE ECONOMY, POLITICAL STABILITY. Unexpected events that cannot be predicted (like the WTC terrorist suicide attack or the pandemic) could push the interest rates up. If home mortgages rates drop to 7% per year, as it did in the US in the late 80s, it would be wise, for the home buyer, to lock in at that unusual low rate. For banks it is wiser to offer only the floating or variable rate. No bank wants to get stuck for 20 years at that very low interest rates. If this 7% rate is the variable rate, most banks would offer a fixed rate of 8.5% guaranteed for 20 years. In the 90s home mortgage rates in the US skyrocketed to the 15% -17% range. If you are buying a home in the US in the 90s and there are 2 rates: 15% fixed and 17% variable, what would you choose? If you are buying a home in US in the 90's and there 2 rates: 15% fixed and 17% variable, what would you choose? Why? If the loan is fully paid and the borrower re-applies, the rate to be used will be the prevailing prime rate at the time of the 2nd loan release. Many banks offer both types of rates? Some only offer the variable rate, which is the safest for banks. What is the best? Any answer will be speculative. No one can predict the future. There are many factors to take into account: PREVAILING RATES, STATE OF THE ECONOMY, POLITICAL STABILITY. Unexpected events that cannot be predicted (like the WTC terrorist suicide attack or the pandemic) could push the interest rates up. If home mortgages rates drop to 7% per year, as it did in the US in the late 80s, it would be wise, for the home buyer, to lock in at that unusual low rate. For banks it is wiser to offer only the floating or variable rate. No bank wants to get stuck for 20 years at that very low interest rates. If this 7% rate is the variable rate, most banks would offer a fixed rate of 8.5% guaranteed for 20 years. In the 90s home mortgage rates in the US skyrocketed to the 15% -17% range. If you are buying a home in the US in the 90s and there are 2 rates: 15% fixed and 17% variable, what would you choose? If you are buying a home in US in the 90's and there 2 rates: 15% fixed and 17% variable, what would you choose? Why?
Expert Answer:
Answer rating: 100% (QA)
The decision between choosing a fixed rate or a variable rate for a home mortgage depends on various factors including personal financial circumstance... View the full answer
Related Book For
Engineering Economic Analysis
ISBN: 9780195168075
9th Edition
Authors: Donald Newnan, Ted Eschanbach, Jerome Lavelle
Posted Date:
Students also viewed these accounting questions
-
Question 11 Convert 105.183" to degree -minute -second form Question 12 4x+6 Solve for the value of x in the following equation: (a3) (Va)" Question 13 Find the coordinates of the circular point, W...
-
Question 1 1 When calculating future value the the interest rate the smaller the future value amount Points 3 Question 2 2 interest is interest that is applied a number of times during the term of a...
-
Question 1 1 pts How many iatoms are in 45 moles of L O GAS atoms O 31 atoms O 75x 10atoms O 27x 10atoms 27 10 atome O 27 10atome O 402x 10 oms Question 2 1 pts How many MOH, launtsa mdee rein1.20...
-
Its estimated that the average corporate user sends and receives some 112 e-mails daily.78 Thats about 14 e-mails per hour, and even if half of those dont require a lot of time and concentration,...
-
Discuss how the coefficient of determination and the coefficient of correlation are related and how they are used in regression analysis.
-
In Problem let g(x) = x 2 and find the given values without using a calculator. g(0); g(0.1)
-
Diet Cola and Weight Gain in Humans A study found that American senior citizens who report drinking diet soda regularly experience a greater increase in weight and waist circumference than those who...
-
Using the data presented in Exercise 8-18, journalize the entry or entries that should be made by the company.
-
Write a python program that drawing the following fill shape. Python Turtle Graphics
-
M&S Inc. uses standard costing. The actual cost of direct labor per hour is $6.25 and the standard cost of direct labor per hour is $6.00. Two budgeted direct labor hours are allowed per finished...
-
Question 1 (15 marks) Total Quality Management (TQM) is founded on the premise that an organisation must continuously strive to improve the quality of its product. Using examples, discuss the...
-
9.5. Let E be an elliptic curve defined over Z7: E: y=x+3x+2. 1. Compute all points on E over Z7. 2. What is the order of the group? (Hint: Do not miss the neutral element 6.) 3. Given the element =...
-
2. Given an analog signal has a range of -4V to 4V, an Analog to Digital Convertor (ADC) will sample the signal every 10ms and map this signal to a digital range from 0 to 8. a. Draw an analog signal...
-
Prepare a multiple-step income statement. (Round answers to O decimal places, e.g. 15,222.) The Clorox Company Income Statement For the Year Ended June 30, 2025 (amounts in millions) Sales Sales...
-
A CPA's engagement letter for the audit of a privately owned bank includes an indemnification clause limiting the liability of the CPA in the event that losses occur due to a knowing...
-
4. You are given a relational schema R = ABC, satisfying the following FDs 1. A B 2. AC 3. B C (a) Which normal forms are satisfied? (b) A decomposition into AB and AC is proposed. i. Which normal...
-
With the rise of influencer controversies and fake followers, how can marketers effectively evaluate and select influencers who align with the brand's values and can deliver authentic engagement and...
-
Making use of the tables of atomic masses, find the velocity with which the products of the reaction B10 (n, ) Li7 come apart; the reaction proceeds via interaction of very slow neutrons with...
-
A student wants to have $30,000 at graduation 4 years from now to buy a new car. His grandfather gave him $10,000 as a high school graduation present. How much must the student save each year if he...
-
The following cash flow transactions are said to be equivalent in terms of economic desirability at an interest rate of 12% compounded annually. Determine the unknown value A. 750 600 450 300 150 2...
-
One thousand dollars is borrowed for one year at an interest rate of 1%per month. If the same sum of money could be borrowed for the same period at an interest rate of 12% per year, how much could be...
-
A political pollster approaches people on the street and asks them to describe their political affiliation. Twenty-eight people describe themselves as Democrats, 25 as Republicans, 8 people provide a...
-
Listed below are a number of hypothetical research hypotheses. For each hypothesis, identify the independent and dependent variable. a. Male drivers are more likely to exhibit road rage behaviors...
-
Listed below are a number of research questions and hypotheses from actual published articles. For each hypothesis, identify the independent and dependent variable. a. The use of color in a Yellow...
Study smarter with the SolutionInn App