Caps are limits on the amount that the interest rate on an Adjustable Rate Mortgage can change at any one adjustment and (usually) over the life of the loan. They protect the borrower from huge increases in the monthly payment in a rising interest rate environment. Rarely, a cap may apply to the payment amount rather than to the rate. Under certain conditions, payment caps can cause the loan balance to increase rather than decrease. See Negative Amortization.
Barry Goldsmith
| APA | Barry Goldsmith. (2010). caps. Retrieved September 20, 2026, from http://smartdefine.org/caps/definitions/1149441 |
| Chicago | Barry Goldsmith. 2010. "caps" http://smartdefine.org/caps/definitions/1149441 (accessed September 20, 2026). |
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| MLA | Barry Goldsmith. "caps" 21 October 2010. Web. 20 September 2026. <http://smartdefine.org/caps/definitions/1149441> |