Consider an adjustable-rate mortgage, Finance Basics

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Consider an adjustable-rate mortgage

Problem:

You are considering purchasing an existing single-family house for $200,000 with a 20 percent down payment and a thirty-year fixed-rate mortgage at 5.5 percent.

Required:

Question 1: What would be your monthly mortgage payment?

Question 2: If you decided to buy two points for a rate of 5 percent, how much would you save in monthly payments? Would it be worth it to buy the points? Why, or why not?

Question 3: When should you consider an adjustable-rate mortgage?

Note: Provide support for your rationale.

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Finance Basics: Consider an adjustable-rate mortgage

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