Life Cap

The maximum amount that the interest rate on an adjustable rate loan can increase over the term of the loan.

A life cap can be expressed as an absolute interest rate - such as a maximum lifetime rate of 12%, which is called an interest rate ceiling - or as a maximum percentage change in the interest rate from the initial interest rate on the loan. When the life cap is expressed as a maximum percentage change from the initial interest rate, it can also apply to interest rate decreases.

The life cap on a loan is used frequently as part of an interest rate cap structure. For example, a fixed period or hybrid ARM frequently has initial, periodic and life caps. On a 5-1 hybrid ARM, this might be expressed as a 5-2-5 cap structure, meaning there is a 5% initial cap, 2% periodic cap and 5% life cap. This means that at the first interest rate change date, the rate could change by a maximum of 5%, and at each subsequent change date the rate could change by a maximum of 2%. The maximum lifetime change in this example is 5%.


Investment dictionary. . 2012.

Look at other dictionaries:

  • CAP Markets — CAP Märkte (CAP Markets) are medium sized neighbourhood supermarkets in Germany employing disabled people. Each unit is typically run by a local disablement association, but the brand is owned by a co operative of sheltered workshops. As well as… …   Wikipedia

  • Cap Arcona — Le Cap Arcona, le 1er janvier 1927. Type Paquebot Histoire Quille posée 21 juillet 1926 …   Wikipédia en Français

  • Cap d'Agde — (IPA2|kap dagd) is the seaside resort of the town of Agde, France, on the Mediterranean sea in the département of Hérault, within the région of Languedoc Roussillon. Agde can be reached by TGV SNCF train direct from Paris or Lille whilst the… …   Wikipedia

  • Cap Esterel II — (Аге,Франция) Категория отеля: 3 звездочный отель Адрес: 83530 Аге, Франция …   Каталог отелей

  • Cap Esterel I — (Аге,Франция) Категория отеля: 3 звездочный отель Адрес: 83530 Аге, Франция …   Каталог отелей

  • Cap O' Rushes — is an English fairy tale collected by Joseph Jacobs in English Fairy Tales . [Joseph Jacobs, English Fairy Tales , [http://www.surlalunefairytales.com/donkeyskin/stories/caporushes.html Cap O Rushes ] ] It is Aarne Thompson type 510B, the… …   Wikipedia

  • cap and gown — n. a cap with a flat top (MORTARBOARD) and a long robe, worn at some academic ceremonies, as commencement, and often used to symbolize the academic life …   English World dictionary

  • Life on Mars — For other uses, see Life on Mars (disambiguation). An artist s impression of what Mars surface and atmosphere may look like if Mars were terraformed. Scientists have long speculated about the possibility of life on Mars owing to the planet s… …   Wikipedia

  • Cap Anson — Infobox MLB retired name=Cap Anson position=First Baseman birthdate =birth date|1852|4|17 city state|Marshalltown|Iowa deathdate =death date and age|1922|4|14|1852|4|17 city state|Chicago|Illinois bats=Right throws=Right debutdate=May 6 debutyear …   Wikipedia

  • Cap Reinga — 34° 25′ 44″ S 172° 40′ 52″ E / 34.42878, 172.68100 …   Wikipédia en Français

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.