Finance
What is 'interest rate cap' in an adjustable-rate mortgage and how does it protect Rhode Island borrowers?
AThe maximum commission a mortgage broker may charge
BA limit on how much the interest rate (or payment) can increase in a given period or over the life of the loan✓ Correct
CA cap on the property's appraised value
DA limit on PMI charges
Explanation
Rate caps on ARMs limit how much the interest rate can change at each adjustment period (periodic cap) and over the life of the loan (lifetime cap). They protect borrowers from dramatic payment increases if interest rates rise sharply.
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