| the frequency of adjustments, the longer the rate remains fixed, the better the loan is for the borrower. Typically, equity mortgage one shorter this is the lower the rate, since there are more opportunities to adjust upwards. Floor - A clause that sets the minimum rate for the interest rate of an ARM loan. Most loans come with a Start Rate = Floor feature, but this is primarily for Non-Conforming (aka Sub-Prime or Program Lending) loan products. This prevents an ARM loan from equity mortgage one adjusting lower. An "A Paper" loan typically has either no Floor or 2% below start. Initial Change Cap - ARM loans have a equity mortgage one maximum first adjustment that is typically higher than allowed on subsequent changes. Periodic Change Cap - The maximum interest rate adjustment for every subsequent periodic adjustment. Life Cap (Ceiling) - The maximum upwards adjustment of an ARM loan. Typically on first mortgages no more than 6% Crucial Information About Caps Loan caps provide payment protection against payment shock. Most First Mortgage loans have a 5% or 6% Life Cap. Higher risk products, such as Monthly Adjustable loans with Negative amortization and Home Equity Lines of Credit aka HELOC equity mortgage one different ways |
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