Periodic Rate Cap

Importance: 0.57

Is a company: no

Is a proper noun: no

Synonyms

  • limit
  • maximum increase in interest
  • largest increase
  • greatest amount

Definition of Periodic Rate Cap

  1. In an adjustable-rate mortgage (ARM), this limit restricts how much an interest rate can fluctuate from one adjustment period to the next.

Related Terms and Acronyms

  • 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.
  • Convertible ARM Definition,
    • An adjustable rate mortgage (ARM) that can be converted to a fixed-rate mortgage under certain conditions.
  • 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.
  • Adjustment Period Definition,
    • The time between changes in the interest rate in an adjustable-rate mortgage.
  • Initial Interest Rate Definition,
    • The introductory interest rate on an adjustable-rate mortgage (ARM), which usually changes at a predetermined time.
  • 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.
  • Cap Definition,
    • 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.
    • A limit imposed on an item.
  • 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.
  • Change Frequency Definition,
    • The scheduled period in which an adjustable-rate mortgage adjusts.
  • Interest Rate (IR) Acronym, Very Important,
    • The rate a lender charges an individual to borrow money.
  • Payment Cap Definition,
    • A contractual limit on the size of the monthly payment of an adjustable-rate mortgage or other variable rate loan.
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