The purpose of a rate cap with an adjustable rate mortgage is to:
A) minimize interest costs.
B) prevent changes in the amount of the monthly payment.
C) increase negative amortization.
D) restrict the amount by which the interest rate can increase.
E) lower the escrow account.

Question

Quizplus · Accepted Answer

The purpose of a rate cap with an adjustable rate mortgage is to restrict the amount by which the interest rate can increase, providing protection to the borrower against sudden and significant increases in interest rates, and therefore, monthly payments.

The Purpose of a Rate Cap with an Adjustable Rate