Cap
A cap is a limit on how much an adjustable-rate mortgage's interest rate can increase, per adjustment or over the loan's life.
What Cap means
Typical caps are written as a set like 2/2/5, meaning a 2% first adjustment cap, 2% per later adjustment, and 5% over the life. Caps protect borrowers from runaway rate spikes.
Florida example
A Florida 5/6 ARM at 6% with 2/2/5 caps can rise no higher than 8% at the first reset and never above 11% over the loan's life, capping the worst-case payment.
What a cap is
A cap is the limit on how much an adjustable-rate mortgage rate can rise. There are caps per adjustment and a lifetime cap.
Caps protect you from runaway payment jumps.
Why it matters
Knowing your caps tells you the worst-case payment on an ARM. Lower caps mean more safety.
We explain every cap before you sign. Reach out and we will show your highest possible payment.
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Verify the details for your own situation against these government and agency sources: CFPB adjustable-rate mortgage guide and CFPB Owning a Home guide.