Finance
A NH homeowner's adjustable-rate mortgage (ARM) has an initial rate of 4% with a 2/6 cap. This means:
AThe rate can increase by 6% at each adjustment, up to 2% total
BThe rate can adjust by no more than 2% per adjustment period and no more than 6% over the life of the loan✓ Correct
CThe rate is fixed for 6 years, then adjusts by 2% annually
DThe rate decreases by 2% every 6 years
Explanation
ARM caps protect borrowers from extreme rate increases. A 2/6 cap means the rate can increase by no more than 2% at each adjustment period (periodic cap) and no more than 6% above the initial rate over the entire loan term (lifetime cap).
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