Also called Lifetime Cap. The maximum interest rate that can be charged during the life of the loan.
Caps apply to adjustable rate mortgages (ARMs). To minimize the risk of extreme fluctuations in interest rate, caps are imposed on your rate. Caps protect you by limiting the percentage by which your rate can increase. A life-of-the-loan cap limits the rate which an ARM can be adjusted over the life of the loan. For example, if your loan has a 6% interest rate and the life-of-the-loan cap is 5 percentage points, your interest rate can rise to 11% but never higher.
With regard to an adjustable rate mortgage, a ceiling the note rate cannot exceed over the life of the loan.
The limit beyond which the rate of interest may not rise throughout the term of an adjustable rate loan.
A Life of Loan Cap is a cap which covers the entire life of a loan.
The maximum interest rate that can be charged during the life of the loan. Also called Life Cap or Life Rate.
The maximum interest rate that can be charged during the life of the loan. Also called Lifetime Cap. This value is often expressed as an increment above the initial loan rate. For example, an adjustable rate loan with an initial rate of 7.25% and a 6% lifetime cap will never adjust above a rate of 13.25% (7.25+6.0).
A contractual limitation on the maximum interest rate that can be applied to an adjustable rate mortgage during the term of the loan.
Limits the amount that a loan rate can change throughout the entire life or term of the loan. A typical life of the loan in use today would be a 5% interest rate cap. back
