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The newest trend in home buying is interest-only mortgages

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The newest trend in home buying is interest-only mortgages  [#permalink]

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New post 08 May 2017, 05:25
9
00:00
A
B
C
D
E

Difficulty:

  85% (hard)

Question Stats:

47% (01:39) correct 53% (01:34) wrong based on 439 sessions

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The newest trend in home buying is interest-only mortgages. These mortgages require a borrower to pay only the interest on the loan. This means that the principle (which is the amount borrowed) never gets any smaller. Buyers never accumulate any equity in their homes and often have to default. Therefore, these loans are bad for Americans and should be made illegal.

The argument in the above passage depends on which of the following assumptions?

(A) Homeowners can’t afford to pay more than the interest on the loan.
(B) Some things that are bad for Americans should be made illegal.
(C) Interest-only mortgages don’t require the buyer to pay more than the interest.
(D) Buyers with no equity in their homes often have to default on their loans.
(E) Owners won’t accumulate equity based on the increasing value of their house.

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Re: The newest trend in home buying is interest-only mortgages  [#permalink]

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New post 08 May 2017, 09:22
can someone please explain. Why E is the correct answer?
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Re: The newest trend in home buying is interest-only mortgages  [#permalink]

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New post 08 May 2017, 09:33
"Buyers never accumulate any equity in their homes" itself strikes like an observation (it sounds like the author has assumed that)..the rest of the premise, if you notice, is more factual .. However to get to that point there should be an underlying assumption which is option E

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Re: The newest trend in home buying is interest-only mortgages  [#permalink]

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New post 09 May 2017, 00:16
Couldn't understand as to why E is the correct answer. Can you help to explain the same?
Thanks
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Re: The newest trend in home buying is interest-only mortgages  [#permalink]

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New post 09 May 2017, 11:21
Premise speaks about homeowners not gaining any equity and conclusion ( based on premise) is that these type of loans ( mortgage) should be deemed illegal negate E and the conclusion will fail based on premise

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Re: The newest trend in home buying is interest-only mortgages  [#permalink]

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New post 09 May 2017, 22:02
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Hi everyone,

Here is the official explanation for this question.

This critical-reasoning question requires you to identify the assumption.

You’re looking for a statement that connects the premises to the conclusion. An assumptionisn’t directly stated in the premises. (You have to accept that the stated premises are true,even if the text doesn’t provide evidence for them.)

Eliminate B because it just restates part of the conclusion. Choice C can’t be an assumption because it restates information from one of the premises. Choice D also essentially restates one of the premises. Choice A is a pretty solid choice; it seems reasonable that most people who take out interest-only mortgages do so because they can’t afford to pay more than the interest. But the conclusion doesn’t depend on this assumption. It does depend on the assumption in E that buyers who aren’t paying down the principle on their loan won’t accumulate value as their home value increases.


Hope this helps. All the best.
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Re: The newest trend in home buying is interest-only mortgages  [#permalink]

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New post 10 May 2017, 20:17
Hi, Need help in understanding,
Isn't E only supporting a premise "Buyers never accumulate any equity in their homes and often have to default" .
Just like rephrasing. the premise in other terms . I eliminated all other options too. Can't justify why E is right. Please help me out. Thank you. :)
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Re: The newest trend in home buying is interest-only mortgages  [#permalink]

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New post 31 May 2017, 17:39
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The newest trend in home buying is interest-only mortgages. These mortgages require a borrower to pay only the interest on the loan. This means that the principle (which is the amount borrowed) never gets any smaller. Buyers never accumulate any equity in their homes and often have to default. Therefore, these loans are bad for Americans and should be made illegal.

The argument in the above passage depends on which of the following assumptions?

(A) Homeowners can’t afford to pay more than the interest on the loan. (weather, they can afford or not doesn't matter because These mortgages require a borrower to pay only the interest on the loan)
(B) Some things that are bad for Americans should be made illegal. (irrelevant)
(C) Interest-only mortgages don’t require the buyer to pay more than the interest. (Given in premise)
(D) Buyers with no equity in their homes often have to default on their loans. (Given in premise)
(E) Owners won’t accumulate equity based on the increasing value of their house. (correct)
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Re: The newest trend in home buying is interest-only mortgages  [#permalink]

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New post 04 Dec 2017, 19:27
first, this question is from GMAT for dummies; this source is unreliable. In addition, the way the question is written is not good.
secondly, using POE, ones can choose E.
The pattern in E is quite important in some ways.
first, E shows that the negation technique works.
secondly, E directly links with the argument.
thirdly, as E indicates, any change in the future will not be counted.
there are more important issues, but ones should figure out the rest.
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Re: The newest trend in home buying is interest-only mortgages  [#permalink]

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New post 07 Apr 2018, 17:16
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If price of a house in 2004 is $20000 and and mortgage set for 2 years for $200 according to agreement . Due to house price hike in 2005 actual price of hose increased $30000 and other people r willing to pay $400 mortgage for that house . This leads to loss of owner of house effects the economy .I hope u understand

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Re: The newest trend in home buying is interest-only mortgages  [#permalink]

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New post 11 Jan 2019, 11:33
rohan2345 wrote:
Hi everyone,

Here is the official explanation for this question.

This critical-reasoning question requires you to identify the assumption.

You’re looking for a statement that connects the premises to the conclusion. An assumptionisn’t directly stated in the premises. (You have to accept that the stated premises are true,even if the text doesn’t provide evidence for them.)

Eliminate B because it just restates part of the conclusion. Choice C can’t be an assumption because it restates information from one of the premises. Choice D also essentially restates one of the premises. Choice A is a pretty solid choice; it seems reasonable that most people who take out interest-only mortgages do so because they can’t afford to pay more than the interest. But the conclusion doesn’t depend on this assumption. It does depend on the assumption in E that buyers who aren’t paying down the principle on their loan won’t accumulate value as their home value increases.


Hope this helps. All the best.



I believe that this is not a GMAT question. Following your statement that stated premises are true, then the premise "Buyers never accumulate any equity" must be true. If the price of the house increases, then the buyer will accumulate equity, so choice E will negate the premise - the premise then would be false. Choice E assumes that the premise is wrong. Not a GMAT question.

If I had to select a choice, this would be B.

The conclusion is: "these loans are bad for Americans and should be made illegal."

Answer B: "Some things that are bad for Americans should be made illegal."
If we negate B-"nothing that is bad for Americans should be made illegal"- the argument is invalid.
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Re: The newest trend in home buying is interest-only mortgages &nbs [#permalink] 11 Jan 2019, 11:33
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