The purpose of a rate cap with a variable 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 a variable rate mortgage is to restrict the amount by which the interest rate can increase. This provides a measure of protection to the borrower against large increases in the interest rate and the resulting increase in monthly payments.

The Purpose of a Rate Cap with a Variable Rate