Cap Rates Caps

Definition of "Cap rates (CAPS)"

Maximum interest rates a borrower might pay for an adjustable rate mortgage. It controls the amount of change in the rate when it adjusts. The first number is the maximum increase allowed for one period of adjustment; the second is the total increase allowed over the life of the loan. A value of zero shown for the first number means that the loan permits negative amortization. A payment cap limits how much the payment due on the loan can increase or decrease.

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