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GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

How often this word is used
 
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50% - Moderately

Rate Cap


Synonyms:adjustable rate mortgage interest rate cap, arm rate cap, interest rate cap
Filed Under: financial-banking, mortgages
Tags: banking, mortgage, rates
 

Definition of rate cap

rate cap
1. A predetermined limit that dictates how much the interest rate on a loan can change, either at each adjustment period or over the life of the loan.

Related Terms and Acronyms:

  • amortization schedule   A detailed table showing the amortization of a loan which includes the beginning principal amount, period payments, the interest portion of each payment, the principal reduction portion each payment, and the ending balance. The Canadian Equity Group has developed a mortgage rate calculator which will generate a perfect example of an amortization schedule.
  • cap   A limit imposed on an item.
  • interest rate cap   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.
  • payment cap   A contractual limit on the size of the monthly payment of an adjustable-rate mortgage or other variable rate loan.
  • 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.

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