GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

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Payment Cap


Synonyms:maximum mortgage payment, maximum payment, mortgage payment cap, payment limit
Filed Under: mortgages
Tags: mortgage
 

Definition of payment cap

payment cap
1. A contractual limitation on the amount of the monthly payment of an adjustable-rate mortgage or other variable rate loan.

Related Terms and Acronyms:

  • adjustable-rate mortgage (ARM)   A type of mortgage loan program in which the interest rate and payments may be adjusted as frequently as every month. The principal loan balance or term of the loan may also be adjusted to reflect the rate change. The purpose of the program is to allow mortgage interest rates to fluctuate with market conditions.
      ➥  A type of variable rate mortgage product.
  • cap   A limit imposed on an item.
  • interest rate cap   A limit to the interest rate increases and decreases on an adjustable rate loan; either from one adjustment period to the next or over the life of the loan.
  • periodic rate cap   In an adjustable-rate mortgage (ARM), it limits how much an interest rate can increase or decrease from one adjustment period to the next.
  • rate cap   A limit on how much the interest rate can change, either at each adjustment period or over the life of the loan.
  • rate index   A table of yields or interest rates being paid on debt (such as Treasury notes or bank deposits) that is used to determine interest-rate changes for adjustable-rate mortgages and other variable-rate loans.
  • variable interest mortgage   A loan where the interest rate may vary during the term of the mortgage. The variance is usually tied to some specific factor such as prime bank rate or the guaranteed investment certificate rate for a designated lender.
  • variable rate mortgage (VRM)   Home loan in which the interest rate is changed periodically based on a standard financial index. Also called an "Adjustable-rate Mortgage."
      ➥  A type of mortgage loan offered by brokers and lenders.

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