On an adjustable-rate mortgage (ARM), the percentage points that a lender adds to the index rate to determine the rate of interest is called the:
A) payment cap
B) interest rate cap
C) margin
D) anchor
E) residual value

Question

Quizplus · Accepted Answer

The margin is the percentage added to the index rate to determine the interest on an ARM. Choice A (payment cap) and B (interest rate cap) refer to limits on how much the interest rate or payment can increase or decrease over time. Choice D (anchor) and E (residual value) are not terms related to ARMs.

On an Adjustable-Rate Mortgage (ARM), the Percentage Points That a Lender