Finance
A Minnesota homebuyer is considering an adjustable-rate mortgage (ARM). Which feature protects the borrower from unlimited rate increases?
AThe teaser rate
BThe index rate
CThe rate cap✓ Correct
DThe margin
Explanation
Rate caps limit how much an ARM interest rate can increase, either per adjustment period (periodic cap) or over the life of the loan (lifetime cap). This protects Minnesota borrowers from extreme payment increases.
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