Cap

A limit on how much an adjustable rate mortgages monthly payment or annual interest rate can increase. A cap is meant to protect the borrower from large increases and may be a payment cap, an interest cap, a life-of- loan cap or periodic cap. A payment cap is a limit on the monthly payment. An interest cap is a limit on the amount of the interest rate. A life-a-loan cap restricts the amount the interest rate can increase over entire term of the loan. A periodic cap limits the amount the interest rate can change each interest rate adjustment date.