Q 01/05

The word 'mortgage' comes from a Law French term meaning what?

A) Long promise

B) Land bond

C) House debt

D) Death pledge

Answer · why

D) Death pledge

Mortgage comes from the Law French mort gage, a death pledge: the pledge 'dies' either when the debt is paid or when the borrower defaults and loses t...

Q 02/05

A buyer who puts 20 percent down has a mortgage with what loan-to-value ratio?

A) 20%

B) 50%

C) 60%

D) 80%

Answer · why

D) 80%

Loan-to-value is the loan divided by the price, so 20 percent down leaves an 80% LTV; above 80% in the US or Canada, mortgage insurance is usually req...

Q 03/05

In the early years of a standard amortising mortgage, most of each payment goes toward what?

A) Principal

B) Property tax

C) Interest

D) Insurance

Answer · why

C) Interest

Interest dominates the early payments because it is charged on the large outstanding balance; the split flips over time until the last payments are al...

Q 04/05

What is the most common mortgage type in the United States?

A) The 30-year fixed rate

B) The five-year fixed closed

C) The 15-year interest-only

D) The two-year tracker

Answer · why

A) The 30-year fixed rate

The 30-year fixed rate is the dominant US product, chosen by the large majority of American homebuyers; its monthly payment never changes over the ful...

Q 05/05

What is a mortgage nicknamed when its balance falls due long before its payment schedule ends?

A) A bridge

B) A bullet

C) A balloon

D) A wraparound

Answer · why

C) A balloon

Such a loan is a balloon mortgage: payments follow a long amortisation schedule, but the remaining balance falls due early. Before the FHA existed, mo...