### What is a level-payment mortgage? - [x] A mortgage with the same payment each month covering principal and interest. - [ ] A mortgage where payments vary month by month. - [ ] A mortgage where only interest is paid initially. - [ ] A mortgage where only the principal is repaid month by month. > **Explanation:** A level-payment mortgage requires the same payment each month (or other period) for full amortization, including both principal and interest. ### Why is a level-payment mortgage advantageous? - [ ] It allows for lower initial interest rates. - [x] It provides payment stability throughout the loan term. - [ ] It increases the equity buildup at a faster rate. - [ ] It reduces the overall cost of the loan. > **Explanation:** The key advantage of a level-payment mortgage is that it provides stability, making it easier to budget consistently as the monthly payment remains constant. ### How is the interest rate in a level-payment mortgage structured? - [ ] It fluctuates yearly based on market conditions. - [x] It remains fixed for the entire term of the loan. - [ ] It's adjustable every 5 years. - [ ] It's linked to the inflation rate. > **Explanation:** The interest rate in a level-payment mortgage is fixed for the entire term of the loan, ensuring that payment amounts stay the same. ### What does a level-payment mortgage typically include? - [ ] Only the loan's interest. - [ ] Only the borrower’s property taxes. - [ ] The full principal at the end of the term. - [x] Both principal and interest in each payment. > **Explanation:** A level-payment mortgage includes both principal and interest in each payment, leading to full amortization by the end of the loan term. ### What is amortization in the context of a level-payment mortgage? - [ ] Payment rate decreases over time. - [ ] Repayment of the loan in a lump sum. - [x] Gradual reduction of principal through regular payments. - [ ] Increase in loan balance over time. > **Explanation:** Amortization in a level-payment mortgage refers to the gradual reduction of the principal through regular, consistent payments that cover both principal and interest. ### If you make extra payments on a level-payment mortgage, what is a potential benefit? - [x] Reduced loan term and interest savings. - [ ] Decrease in the fixed interest rate. - [ ] Increase in property's market value. - [ ] Higher monthly payments in the short term. > **Explanation:** Making extra payments can reduce the loan term and save on interest, as the principal balance decreases faster than scheduled. ### Who might find a level-payment mortgage particularly beneficial? - [ ] Buyers expecting significant income increases. - [x] Buyers looking for predictable monthly payments. - [ ] Buyers who plan to sell the property in less than a year. - [ ] Buyers preferring adjustable-rate mortgages. > **Explanation:** Buyers seeking predictability and stability in their monthly payments find level-payment mortgages beneficial due to consistent payment amounts. ### Based on what criteria are monthly payments determined in a level-payment mortgage? - [ ] Duration until the next market rate adjustment. - [ ] Changes in property market value. - [x] Loan amount, fixed interest rate, and loan term. - [ ] Impacts from market inflation. > **Explanation:** The monthly payments are determined based on the loan amount, the fixed interest rate, and the length of the loan term. ### What happens to the principal in a level-payment mortgage over time? - [ ] It remains constant. - [ ] It initially increases before decreasing. - [x] It decreases as regular payments are made. - [ ] It has no effect on monthly payments. > **Explanation:** The principal in a level-payment mortgage gradually decreases over time as regular monthly payments are made. ### How is a mortgage constant related to level-payment mortgages? - [ ] It fixes the interest amount per year. - [ ] It adjusts payments for inflation annually. - [ ] It ensures payments decrease monthly. - [x] It calculates the relationship between the mortgage payment and principal. > **Explanation:** A mortgage constant expresses the relationship between monthly mortgage payments and the principal of the loan, which is essential for understanding and comparing the costs of loans.