Harry has an adjustable rate mortgage (ARM) with an initial rate of 4 percent. If the annual increase cap is 1 percent and the lifetime rate increase cap is 5 percent, what is the maximum annual rate that Harry could have to pay on this loan in the future? A : The rate is unlimited on an ARM. B : 10 percent C : 5 percent D : 9 percent
Mortgages
A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.
Mortgage
The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.
Harry has an adjustable rate mortgage (ARM) with an initial rate of 4 percent. If the annual increase cap is 1 percent and the lifetime rate increase cap is 5 percent, what is the maximum annual rate that Harry could have to pay on this loan in the future?
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A : The rate is unlimited on an ARM.
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B : 10 percent
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C : 5 percent
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D : 9 percent
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