Upper limit (cap) for the interest rate on a loan. This clause is commonly included in adjustable rate mortgage agreements, and (unlike annual cap) does not allow any increase beyond the cap for the entire duration of the loan. For example, a borrower who agreed to a loan at 10% interest rate and a life of loan cap of 5% will never have to pay more than 15% interest rate.
Related information about life of loan cap:
- Life of Loan Cap: Definition from Answers.com
Life of Loan Cap Contractual provision in an Adjustable Rate Mortgage limiting the interest rate increase over the amortized life of the loan.
- What is life of loan cap? definition and meaning
Definition of life of loan cap: Upper limit (cap) for the interest rate on a loan. This clause is commonly included in adjustable rate mortgage agreements, and ...
- life-of-loan cap - Financial Dictionary - The Free Dictionary
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 Definition | Business Dictionaries from AllBusiness.com
Example: An adjustable rate mortgage is offered at the initial interest rate of 7.5% and has a life of loan cap of 5 percentage points. At no time during the term of ...
- Pricing Rate Caps on Default-Free Adjustable-Rate Mortgages
... the addition to the coupon rate on a one-month ARM that lenders should have charged for a 5 percent life of loan cap has ranged from 5 to 40 basis points.
- Lending Services - Local Government Federal Credit Union
five years with a 6 percent life-of-loan cap. Two-Year Adjustable-Rate Mortgage ( ARM). ✦ Lower initial interest rate and payment than a fixed rate mortgage ...
- Adjustable - Lake Shore Savings Bank
Life of loan cap +/-6%, Floor 4.25%, Minimum down payment required for purchases is 5%. PMI insurance required if LTV>80%. Title insurance required. Escrow ...
- Adjustable Rate Mortgages
... adjustment at the first change date (initial cap) and/or subsequent change dates (periodic cap) and the maximum rate over the life of the loan (life-of-loan cap).