CFA CFA Level 1 CFA Level 1 Question of the Week – Fixed Income (mortgage)

CFA Level 1 Question of the Week – Fixed Income (mortgage)

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    • Matt_AnalystPrep
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        • CFA Charterholder
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        A mortgage that starts at a fixed rate initially and is converted to a different fixed rate at a later date is most likely referred to as a:

        • A. hybrid mortgage.
        • B. rollover mortgage.
        • C. convertible mortgage.
      • Matt_AnalystPrep
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          • CFA Charterholder
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          The correct answer is B.

          A mortgage that starts out with a fixed rate and converted to a fixed rate later is referred to as a rollover or renegotiable mortgage. These are often used in Canada, Germany, Denmark, etc.

          If the mortgage starts at a fixed rate and is later converted into an adjustable rate mortgage, then we would say this is a hybrid mortgage.

          A convertible mortgage is an adjustable-rate loan that gives the borrower the option to convert the loan to a fixed-rate mortgage.

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          Thank you for the detailed and detailed answer. I think that everyone intuitively guessed which answer was correct. It is worth adding more complex tasks to think about the answer. I have recently been very interested in real estate and mortgages.

          Arnold voted up
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