Price-level-adjusted mortgage

Reference no: EM13321796

An alternative type of mortgage loan is called a price-level-adjusted Mortgage (PLAM), which sets all mortgage payments and the principal amount of the mortgage in real rather than nominal terms. Thus, if the inflation rate was 10 percent in a certain year, the monthly payment would be increased by 10 Percent in dollar terms. Who gains from this type of mortgage-the homeowner? Or the bank or both? Who bears the inflation risk?

Reference no: EM13321796

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