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What do the CAPS and Margin mean on an Adjustable Rate Mortgage(ARM)?

April 26, 2017adjustable rate mortgage arm caps margin mean

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What do the CAPS and Margin mean on an Adjustable Rate Mortgage(ARM)?

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Interest Rate Caps come in two versions. Periodic adjustment caps, which limit the amount the interest rate can adjust up or down from one adjustment period to the next after the first adjustment and Lifetime caps, which limit the interest-rate increase over the life of the loan. By law, virtually all ARMS must have a lifetime cap. Margin is the amount the lender adds to the index on an ARM to establish the adjusted interest rate.