Define and explain how adjustable-rate mortgages work, analyzing the potential benefits of initially lower interest rates and the risks associated with future rate adjustments, including the possibility of increased payments.

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Don’t forget to include a a reference in apa format the text book readings
Read Chapter 7: “Financing of Real Estate”

Unit 7 Assignment

Course Outcome addressed in this assignment

PA300-4: Analyze the role of debt in real estate finance.

GEL 4.01: Describe how personal experiences influence workplace culture.

Assignment Scenario

Amos Calvin, a new associate attorney at the law firm, has asked you to sit in on an interview with a new client, Mariah Johnson. Ms. Johnson has recently inherited a large sum of money and would like to purchase her first home. However, since this will be Mariah’s first real estate purchase, she is confused about the role debt can play in financing the purchase of real estate.

Following the interview with Mariah, Amos tasked you with preparing a client letter explaining to Mariah three different types of mortgage payments commonly utilized today in the real estate industry. Amos has tasked you with preparing at least a 2-page, single-spaced client letter addressed to Mariah that analyzes and explains the role debt will play in financing her first home.

Within your letter, you are to define and explain how fixed-rate, adjustable-rate, and interest-only mortgages work. You are to analyze the pros and cons of fixed-rate mortgages, focusing on the stability of fixed monthly payments and the impact the loan term can have on interest rates and overall cost. Within your discussion of adjustable-rate mortgages, you need to analyze the potential benefits of initially lower interest rates and the risks associated with future rate adjustments, including the possibility of increased payments. Finally, in your discussion of interest-only mortgages, you are to analyze the short-term benefits of lower initial payments and the long-term considerations, including the implications of the balloon payments at maturity.

Assignment Instructions

Draft at least a 2-page single-space client letter discussing the following issues:

-Define and explain how fixed-rate mortgages work, analyzing the pros and cons, focusing on the stability of fixed monthly payments and the impact of the loan term (e.g., 15, 30 years) on interest rates and overall cost.

-Define and explain how adjustable-rate mortgages work, analyzing the potential benefits of initially lower interest rates and the risks associated with future rate adjustments, including the possibility of increased payments.

-Define and explain how interest-only mortgages work, analyzing the short-term benefits of lower initial payments and the long-term considerations, paying particular attention to the implications of the balloon payments at maturity.

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