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

Question

Quizplus · Accepted Answer

A five-year closed mortgage at five and a half percent would be the best option for the Jones. Since they expect interest rates to stay the same for the next five years, this type of mortgage would provide them with stability and certainty with their mortgage payments. Additionally, they do not have any prospects for an increase in their income, so it would be best to lock in a fixed rate for a longer term to avoid future increases in interest rates. The other options either have a shorter term or are open variables, which could result in higher interest rates and unpredictable payments in the future.

Which Mortgage Option Is Best in the Following Scenario