The rate cap on an ARM protects the borrower. True or false? Explain.

Question:

The rate cap on an ARM protects the borrower. True or false? Explain.

Interest rate cap

The interest rate cap refers to the maximum adjustment allowed in the interest rate of an Adjustable Rate Mortgage or a floating rate mortgage during a particular period.

Answer and Explanation:

An interest rate cap is the means by which adjustment in the floating rate of a loan can be done to a maximum amount. For example in an ARM the terms...

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Types of Interest Rates & Investments

from CLEP Social Sciences and History: Study Guide & Test Prep

Chapter 64 / Lesson 4
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