Periodic Rate Cap
Definition
- In an adjustable-rate mortgage (ARM), this limit restricts how much an interest rate can fluctuate from one adjustment period to the next.
Synonyms
limit, maximum increase in interest, largest increase, greatest amount
Related Terms and Acronyms
- Adjustable-Rate Mortgage (ARM) — Acronym,
- A type of mortgage loan program in which the interest rate and payments may be adjusted as frequently as every month. The principal loan balance or term of the loan may also be adjusted to reflect the rate change. The purpose of the program is to allow mortgage interest rates to fluctuate with market conditions.
➥ A type of variable rate mortgage product. - Adjustment Period — Definition,
- The time between changes in the interest rate in an adjustable-rate mortgage.
- Cap — Definition,
- A limit imposed on an item.
- The top limit on the amount the interest rate can increase during a single time period of an adjustable-rate mortgage. Every ARM has two caps: a periodic cap, which limits the periodic changes to the interest allowed in the loan agreement, and a lifetime cap, which governs the total increase that can be imposed during the life of the loan.
- Change Frequency — Definition,
- The scheduled period in which an adjustable-rate mortgage adjusts.
- Convertible ARM — Definition,
- An adjustable rate mortgage (ARM) that can be converted to a fixed-rate mortgage under certain conditions.
- Initial Interest Rate — Definition,
- The introductory interest rate on an adjustable-rate mortgage (ARM), which usually changes at a predetermined time.
- Interest Rate (IR) — Acronym, Very Important,
- The rate a lender charges an individual to borrow money.
- Interest Rate Cap — Definition,
- A limit to the interest rate increases and decreases on an adjustable rate loan; either from one adjustment period to the next or over the life of the loan.
- Payment Cap — Definition,
- A contractual limit on the size of the monthly payment of an adjustable-rate mortgage or other variable rate loan.
- Rate Cap — Definition,
- A limit on how much the interest rate can change, either at each adjustment period or over the life of the loan.
- Variable Rate Mortgage (VRM) — Acronym, Very Important,
- Home loan in which the interest rate is changed periodically based on a standard financial index. Also called an "Adjustable-rate Mortgage."
➥ A type of mortgage loan offered by brokers and lenders.
