Important Notice: Our web hosting provider recently started charging us for additional visits, which was unexpected. In response, we're seeking donations. Depending on the situation, we may explore different monetization options for our Community and Expert Contributors. It's crucial to provide more returns for their expertise and offer more Expert Validated Answers or AI Validated Answers. Learn more about our hosting issue here.

What is a Periodic Rate Cap?

cap periodic rate
0
Posted

What is a Periodic Rate Cap?

0

The Periodic Rate Cap will limit how much your interest rate can increase in any one cycle. For example, should your interest rate be adjusted annually and your Periodic Rate Cap is 2 percent, then even if interest rates were to rise by 3.5 percent, your mortgage rate could only be increased by 2 percent each year. What is a Lifetime Rate Cap? This type of cap sets a maximum limit on how high the interest rate can be raised during the life of the mortgage loan. For example, should you take out a mortgage at 6.25 percent with a lifetime cap of 6 percent, the highest your rate could ever go would be 12.25 percent. By today’s standards that may seem to be a very high rate. However, in the early 1980’s interest rates were as high as 16 percent. Should the economy cause that to happen again, a borrower with a mortgage loan like the one used in our example would be in good shape because their interest rate could only go as high as 12.25 percent. Usually, the initial rate offered in an adjust

Related Questions

Thanksgiving questions

*Sadly, we had to bring back ads too. Hopefully more targeted.