Finance
A 'teaser rate' on an Oklahoma ARM can lead to payment shock when:
AThe property's value increases
BThe initial low rate expires and the rate adjusts to the fully indexed rate, causing monthly payments to rise significantly✓ Correct
CThe borrower pays extra principal
DThe loan is refinanced
Explanation
Payment shock occurs when an ARM's teaser rate expires and the rate adjusts to (or beyond) the fully indexed rate, potentially causing significant increases in the monthly payment. Borrowers should be educated about this risk.
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