Colorado Sales License Practice Test

A fixed-rate mortgage is characterized by a consistent interest rate throughout the life of the loan. This means that the borrower's monthly payment remains the same, providing stability and predictability in financial planning. Such a structure is advantageous for homeowners who wish to avoid the uncertainty of fluctuating payments that can occur with other types of mortgages.

In contrast, adjustable-rate mortgages (ARMs) typically start with a lower initial interest rate that can change over time based on market conditions. This variability often means that the payments can increase significantly after the initial period, making financial planning more complex.

The other options suggest various misunderstandings about mortgage types. For example, fixed-rate mortgages can be refinanced to take advantage of lower rates or better terms, adjustable-rate mortgages do not universally require a down payment as that varies by lender and borrower's financial situation, and the assertion that adjustable-rate mortgages have higher initial rates doesn't accurately describe their common structure; they usually start lower than fixed-rate mortgages.