Graduated payments result in the borrower paying:
A. The mortgage at 1/2 the standard rate
B. Less at the beginning of the mortgage
C. Less at the end of the mortgage
D. None of these
Answer (2)
Graduated payment mortgages feature payments that start low and increase over time.
This structure allows borrowers to pay less at the beginning of the mortgage.
This contrasts with paying less at the end, which is not a characteristic of graduated payment mortgages.
Therefore, graduated payments result in paying Less at the beginning of the mortgage .
Explanation
Understanding Graduated Payment Mortgages A graduated payment mortgage is a type of mortgage where the payments start low and increase over time.
Comparing Options Now, let's compare this definition to the given options:
The mortgage at 1/2 the standard rate: This is not related to graduated payment mortgages.
Less at the beginning of the mortgage: This aligns with the definition of graduated payment mortgages.
Less at the end of the mortgage: This is the opposite of what happens in graduated payment mortgages.
None of these: This is incorrect since one of the options aligns with the definition.
Selecting the Correct Option Based on the definition and comparison, the correct answer is that graduated payments result in the borrower paying less at the beginning of the mortgage.
Examples
Imagine you're starting a new business and expect your income to increase over the first few years. A graduated payment mortgage would allow you to make smaller payments initially when your income is lower, and then gradually increase your payments as your income grows. This can make homeownership more accessible during the early stages of your career or business venture. It's a way to align your mortgage payments with your expected income growth.
Graduated payment mortgages allow borrowers to pay less at the beginning, as payments start low and increase over time. Therefore, the correct answer is that borrowers pay less at the beginning of the mortgage. This structure is particularly helpful for those expecting their income to rise.
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