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With a fixed-rate mortgage (FRM), the ___________ bears the interest rate risk and with an Adjustable...

With a fixed-rate mortgage (FRM), the ___________ bears the interest rate risk and with an Adjustable Rate Mortgage (ARM) the __________ bears the interest rate risk.

A.

borrower; lender
B.

lender; lender
C.

borrower; borrower
D.

lender; borrower
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Answer #1

If FRM is used. Lender will lose the opportunity of charging higher interest rate.

If ARM is used, Borrower will have to face the risk of rise in interest rate.

Hence, correct option is D.

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