47. An adjustable rate mortgage may be a poor fit for a buyer
Answer: A
An adjustable rate mortgage may be a poor fit for a buyer who is about to retire.
Buyers approaching retirement may find an adjustable rate mortgage (ARM) unsuitable due to the potential for fluctuating interest rates, which could lead to increased monthly payments. This unpredictability can strain a fixed income during retirement years.
A) who is about to retire.
This option is correct because individuals nearing retirement typically seek financial stability and predictability in their expenses. An ARM's variable rates can create uncertainty in budgeting, making it a less favorable choice for those who may have limited income post-retirement.
B) whose income is likely to increase.
This option is incorrect as buyers with an expected income increase may benefit from an ARM, as they could handle potential rate increases better. Additionally, they might take advantage of lower initial rates before their income increases, making this a viable option.
C) who intends to own the property for a short time.
This option is not accurate since buyers who plan to own a home for a short duration may actually benefit from an ARM, which typically offers lower initial rates. This can result in lower payments during the time they own the home, making it a more appealing choice for short-term ownership.
D) who is receiving the down payment as a gift from parents.
This option is incorrect as the source of the down payment does not directly relate to the suitability of an ARM. A buyer receiving a gift may still choose an ARM based on their financial circumstances and housing plans, regardless of how they fund their down payment.
Conclusion
In conclusion, option A is definitively correct as it highlights the risks associated with an ARM for those nearing retirement, who may prioritize financial stability. Other options either misinterpret the suitability of an ARM based on personal circumstances or fail to recognize the unique financial needs of buyers in different situations, thus making them less appropriate choices.