FinanceQuestion 78 of 120
In an adjustable-rate mortgage (ARM), the interest rate is periodically adjusted based on a specified:
a.Appraised value of the home
b.Financial index plus a margin
c.Broker's commission rate
d.Property tax rate
Explanation
An ARM's rate is tied to a published index, and the lender adds a fixed margin to set the new rate at each adjustment. Caps typically limit how much the rate can change per period and over the loan's life.
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