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A home loan to a borrower with a relatively high creditworthiness and likelihood that payments will...

A home loan to a borrower with a relatively high creditworthiness and likelihood that payments will be made when due is called which of the following?

Fixed-rate mortgage

Prime mortgage

Subprime mortgage

Adjustable-rate mortgage
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Answer #1

Answer: Prime mortgage. Prime mortgages are considered high quality and they are offered prime or relatively low interest rates. This is one of the lowest risk loan groups in balance sheets. Borrowers who have good credit score and stable income fall into this category.

Subprime mortgage are the loans given to borrowers with poor credit history. Their probability of defualt is higher and hence demand high rate of interest.

Fixed rate and adjustable rate mortgage are just types of interest rates which are offered to borrowers.

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