Mortgage Dictionary
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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:
-
Periodic caps set limits on the amount that interest
rates may rise or fall during a specified time period, often 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.