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Question: 1 / 400

What is the key characteristic of a "fixed-rate mortgage"?

The interest rate changes annually

The interest rate remains unchanged for the life of the loan

A fixed-rate mortgage is defined by its stability in interest rates. The crucial characteristic of this type of mortgage is that the interest rate remains unchanged throughout the entire duration of the loan. This steadiness allows borrowers to predict and manage their monthly payments easily, since they will not be subject to variations due to market fluctuations.

This consistency is particularly beneficial in financial planning, as homeowners can anticipate their expenses over the life of the mortgage, thereby avoiding unexpected increases in payment amounts. In contrast, the other options describe mortgage types or characteristics that inherently involve variability, such as adjustable-rate mortgages, where the interest rate can change, or scenarios of increasing loan amounts, which are not typical of fixed-rate mortgages.

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The loan amount increases over time

The monthly payment fluctuates based on market conditions

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