- A contractual limitation on the amount of the monthly payment of an adjustable-rate mortgage or other variable rate loan.
payment limit, mortgage payment cap, maximum mortgage payment, maximum payment
Related Terms and Acronyms
- Adjustable-Rate Mortgage (ARM) — Acronym,
➥ A type of variable rate mortgage product.
- 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.
- 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.
- 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.
- Periodic Rate Cap — Definition,
- In an adjustable-rate mortgage (ARM), it limits how much an interest rate can increase or decrease from one adjustment period to the next.
- 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.
- Rate Index — Definition,
- A table of yields or interest rates being paid on debt (such as Treasury notes or bank deposits) that is used to determine interest-rate changes for adjustable-rate mortgages and other variable-rate loans.
- Variable Interest Mortgage — Definition, Important,
- A loan where the interest rate may vary during the term of the mortgage. The variance is usually tied to some specific factor such as prime bank rate or the guaranteed investment certificate rate for a designated lender.
- Variable Rate Mortgage (VRM) — Acronym, Very Important,
➥ A type of mortgage loan offered by brokers and lenders.
- Home loan in which the interest rate is changed periodically based on a standard financial index. Also called an "Adjustable-rate Mortgage."