Choose wisely. There is only one correct answer to each question.
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1.
One disadvantage of refinancing your mortgage is that you may lose some of the equity in your home.
True. If you cash out a portion of your equity when you refinance, it may take you longer to own your home debt-free.
2.
You may want to refinance your adjustable-rate mortgage if you want to reset your mortgage's lifetime adjustment cap.
True. When you replace your old adjustable-rate mortgage with a new one at a lower rate, you usually reset your mortgage's adjustment cap to a lower level.
3.
Refinancing a mortgage is worth considering only when interest rates drop at least 2 percent.
False. Refinancing may be worthwhile even if interest rates drop only by a percentage point or so, IF you plan to keep your home for a long period.
4.
No-cost refinancing frees a borrower from most costs associated with a refinanced mortgage.
False. No-cost refinancing offers a mortgage with zero points, usually at a somewhat higher interest rate. Other costs normally associated with closing still must be paid.
5.
To calculate how long it will take for a refinance to break even with your current mortgage, you need to _______.
All of the above. These are the basic steps in calculating your break-even date.