document.write( "Question 1202142: The margin on an adjustable-rate mortgage is 4.5% and the rate cap is 5% over the life of the loan. If the current index rate is 8.8%, find the maximum overall rate (as a %) of the loan\r
\n" ); document.write( "\n" ); document.write( "=_____% \n" ); document.write( "

Algebra.Com's Answer #836968 by Theo(13342) $\"\"$ $\"About$

You can put this solution on YOUR website!
the margin is 4.5% and the rate cap is 5% over the life of the loan.
\n" ); document.write( "the curent index is 8.8%.
\n" ); document.write( "the margin is the amount you pay on top of the index.
\n" ); document.write( "the rate cap is is the maximum percent you can go over the index.
\n" ); document.write( "i think what this means is that you pay the index rate for a period of years and then your rate can increase periodically until you reach the maximum rate cap.
\n" ); document.write( "here's a reference.\r
\n" ); document.write( "
\n" ); document.write( "\n" ); document.write( "https://www.investopedia.com/terms/i/capstructure.asp\r
\n" ); document.write( "
\n" ); document.write( "\n" ); document.write( "applying this to your problem, i get:
\n" ); document.write( "the current rate if 8.8%.
\n" ); document.write( "you would pay that much for the initial period.
\n" ); document.write( "once the initial priod is over, you can pay 4.5% over over the initial rate = 8.8 + 4.5 = 13.3%.
\n" ); document.write( "this might be all at once, or in smaller increments, such as maybe 1% or 2% each time it increases.
\n" ); document.write( "the rate cap is the maximum the rate can increase over the life of the loan.
\n" ); document.write( "this would be equal to 8.8% + 5% = 13.8%.
\n" ); document.write( "your solution should be that the maximum rate would be 13.8 over the life of the loan, if i understood what they're saying correctly.
\n" ); document.write( " \n" ); document.write( "

\n" );