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GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

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Interest Rate Cap


Synonyms:cap, payment cap, periodic rate cap
Filed Under: legal-contracts, mortgages
Tags: contract, legal, mortgage, rates
 

Definition of interest rate cap

interest rate cap
1. A limit that is imposed upon interest rate increases and decreases for an adjustable rate loan. The cap or limit can be imposed from one adjustment period to the next or over the entire life of the loan.

Related Terms and Acronyms:

  • annual crediting cap   The highest rate that can be credited to an equity-indexed annuity in a year.
  • cap   A limit imposed on an item.
  • fixed rate mortgage (FRM)   A loan in which the interest rate and payments remain the same for the entire life of the loan. The interest rate and payment amounts are set at the time of loan origination.
  • interest rate (IR)   The rate a lender charges an individual to borrow money.
  • mortgage (mtg)   A mortgage is a contract stipulating a specific real property, typically a residence or building, as collateral for a loan. The mortgage incurs a rate of interest that varies according to term and other features.
  • mortgage rate   The interest rate on a mortgage loan.
      ➥  You can compare mortgage rates using this website by clicking 'Rates' above.
  • periodic rate cap   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   A limit on how much the interest rate can change, either at each adjustment period or over the life of the loan.
  • rate index   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 rate mortgage (VRM)   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.

More Related Terms and Acronyms

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