An adjustable rate mortgage with a baseline rate of 4%,a margin of 1%,and an annual cap of 1% would have an initial mortgage rate no higher than 6%.

Question

Quizplus · Accepted Answer

The baseline rate of 4% plus the margin of 1% would result in an initial mortgage rate of 5%. The annual cap of 1% means that the rate cannot increase by more than 1% in any given year. Therefore, if the initial rate is 5%, the highest it can go in the first year would be 6%.

An Adjustable Rate Mortgage with a Baseline Rate of 4%,a