General Mortgage KnowledgeQuestion 132 of 400
An ARM has a start rate of 3.00% and a lifetime cap of 5%. What is the highest interest rate the loan can ever reach?
a.5.00%
b.3.00%
c.10.00%
d.8.00%
Explanation
The lifetime cap limits total increase over the start rate: 3.00% + 5% = 8.00% maximum. 5.00% confuses the cap with the ceiling, and 10.00% double-counts.
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