Definition: The maximum total interest-rate increase permitted over the life of an adjustable-rate mortgage, as specified in the loan terms.
Example
A loan starting at 5% with a five-percentage-point lifetime increase cap cannot exceed 10%, subject to its other terms.
Keep the distinction clear
A lifetime cap limits the ultimate rate. A periodic cap limits a particular adjustment; neither should be confused with a limit on the dollar payment.
Related terms
Adjustable-Rate Mortgage (ARM) · Index Rate (ARM) · Margin (ARM)
Keep studying
References: CFPB: ARM rate caps
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