Finance
An interest rate cap on an ARM loan protects the borrower by:
AGuaranteeing the rate will decrease each period
BLimiting how much the interest rate can increase at each adjustment or over the life of the loan✓ Correct
CConverting the loan to fixed rate after five years
DAllowing the borrower to skip payments
Explanation
ARM caps limit how much the interest rate can rise at each adjustment period (periodic cap) and over the life of the loan (lifetime cap), protecting borrowers from extreme payment increases.
Related Georgia Finance Questions
- A Georgia buyer takes out a $240,000 mortgage at a 7% fixed rate, fully amortized over 30 years. The monthly payment factor at 7% for 30 years is $6.65 per $1,000. What is the approximate monthly P&I payment?
- An 'interest rate cap' on an adjustable rate mortgage (ARM) limits:
- The Equal Credit Opportunity Act (ECOA) prohibits lenders from discriminating based on all of the following EXCEPT:
- Under RESPA's Section 8, an affiliated business arrangement (ABA) disclosure must be provided:
- Under the Community Reinvestment Act (CRA), federally regulated banks are required to:
- A lender who uses a deed to secure debt in Georgia is exercising what type of legal theory for foreclosure?
- A 'VA funding fee' is charged to VA borrowers because:
- A 'certificate of eligibility' (COE) is required for which type of loan?
Practice More Georgia Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Georgia Quiz →