Tennessee Realtor State Practice Exam

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Prepare for the Tennessee Realtor State Exam with questions and explanations designed to help you succeed. Master the principles and regulations of real estate in Tennessee. Ace your exam with confidence!

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What action can borrowers take to temporarily lower the interest rate on their mortgage loan?

Fixing
Buydown
Refinancing
Extending

The correct answer is: Buydown

Borrowers can temporarily lower the interest rate on their mortgage loan through a buydown, which involves paying upfront fees to reduce the rate for a defined period, typically the first few years of the loan. This payment is often made in the form of points, where each point is equal to 1% of the loan amount. By lowering the interest rate temporarily, borrowers can enjoy reduced monthly payments and potential cash flow relief during those initial years. In contrast to other options, fixing refers to setting an interest rate for the entire loan term, which does not provide a temporary reduction. Refinancing involves taking out a new loan to replace the existing one, which can lower the rate but is generally a longer-term solution. Extending typically means lengthening the loan term, which could reduce monthly payments but does not necessarily decrease the interest rate. Thus, a buydown offers a specific, strategic way to achieve temporary reductions in the mortgage rate, making it the correct choice.