Marjorie bought a home with an adjustable-rate mortgage. The margin on an adjustable-rate mortgage is 2.5% and the rate cap is 7% over the life of the loan. If the current index rate is 5.9%, what is the calculated interest rate of the ARM?

Question

Quizplus · Accepted Answer

The calculated interest rate of the ARM is the current index rate plus the margin. In this case, the current index rate is 5.9% and the margin is 2.5%, so the calculated interest rate is 5.9% + 2.5% = 8.4%.

Marjorie Bought a Home with an Adjustable-Rate Mortgage