life-of-loan cap

life-of-loan cap

The maximum amount an adjustable-rate mortgage can increase. If the initial interest rate is 6.5 percent with adjustments allowed every 3 months, but there is a life-of-loan cap of 5 percent,then the highest interest rate that can be charged will be 6.5 percent plus 5 percent, or 11.5 percent. Also called “lifetime cap.”

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
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