General Mortgage KnowledgeQuestion 144 of 400
An ARM is described with caps of 2/2/5. What does the final number (5) represent?
a.The margin
b.The initial adjustment cap
c.The periodic cap
d.The lifetime cap
Explanation
In the 2/2/5 caps structure, the numbers are the initial cap, the periodic cap, and the lifetime cap; the 5 is the lifetime cap limiting total increase over the start rate. It is not the margin or the initial/periodic cap.
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