Which of the following is NOT a potential risk of a sub-prime mortgage?

Which of the following is NOT a potential risk of a sub-prime mortgage?

• A. Higher monthly payments
• B. Equity building quickly
• C. Higher overall costs
• D. Risk of foreclosure

Answer: (B)

The choice indicating that equity building quickly is NOT a potential risk of a sub-prime mortgage is accurate because sub-prime mortgages typically come with unfavorable terms for the borrower. These loans often feature higher interest rates and fees, leading to elevated monthly payments and total costs. As a result, borrowers may find it challenging to build equity in their homes since a significant portion of their payments goes toward interest rather than principal reduction. In contrast, the other options highlight potential risks associated with sub-prime mortgages. Higher monthly payments can strain a borrower's finances, creating a stress point. Similarly, the higher overall costs due to interest and fees can result in financial difficulties over time. Lastly, the risk of foreclosure is a critical concern tied to the nature of sub-prime lending, as borrowers may default due to unaffordable payments. Therefore, the assertion that equity building quickly is not a risk aligns with the typical profile of sub-prime mortgages, which often hinder rather than accelerate equity accumulation.

The choice indicating that equity building quickly is NOT a potential risk of a sub-prime mortgage is accurate because sub-prime mortgages typically come with unfavorable terms for the borrower. These loans often feature higher interest rates and fees, leading to elevated monthly payments and total costs. As a result, borrowers may find it challenging to build equity in their homes since a significant portion of their payments goes toward interest rather than principal reduction.

In contrast, the other options highlight potential risks associated with sub-prime mortgages. Higher monthly payments can strain a borrower's finances, creating a stress point. Similarly, the higher overall costs due to interest and fees can result in financial difficulties over time. Lastly, the risk of foreclosure is a critical concern tied to the nature of sub-prime lending, as borrowers may default due to unaffordable payments.

Therefore, the assertion that equity building quickly is not a risk aligns with the typical profile of sub-prime mortgages, which often hinder rather than accelerate equity accumulation.