Finance
A Hawaii buyer obtains an adjustable-rate mortgage (ARM). What is the 'cap' in an ARM?
AA. The maximum loan amount allowed
BB. A limit on how much the interest rate can change at each adjustment and over the loan's life✓ Correct
CC. The minimum interest rate the lender can charge
DD. The maximum debt-to-income ratio allowed
Explanation
ARM caps limit how much the interest rate can increase per adjustment period and over the life of the loan, protecting borrowers from unlimited rate increases.
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