INTEREST RATE CAP STRUCTURE
Interest limits on an adjustable rate loan, which is usually linked to mortgages. There are various types of interest rate cap structures such as initial cap, periodic cap, and lifetime cap. Initial cap refers to a value that restrains the amount of interest that can be adjusted at the mortgage’s first interest rate adjustment date. Periodic cap is a value that constricts the amount the interest rate can be adjusted at each subsequent adjustment date. Lifetime caps limits the total amount the interest rate can be adjusted over the mortgage’s life.
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