Mortgage Dictionary: Definition of Rate Cap
Here is the definition for 'Rate Cap'. To show a different definition, select a term from the dropdown text box. The online mortgage glossary will display a definition, plus links to related information.
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Rate Cap
A rate cap is a protective measure in some
adjustable-rate mortgages
. Rate caps set limits on the amount that
interest rates may rise or fall. There are two types of rate caps:
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Periodic caps set limits on the amount that interest
rates may rise or fall annually.
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Lifetime caps set limits on the amount that interest
rates may rise or fall over the life of the loan.
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