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inflation. The index is a measure of the cost of funds bank loan measured by inflation. Index - A publicly published financial index such as LIBOR (usually 1 month, 6 month or 12 month), 11th District Cost of Funds Index, MTA, etc. Start Rate - The introductory rate provided to bank loan of ARM loans for the initial fixed interest period. The difference between the "Start Rate" of an ARM and the rate of a fixed terms loan is that the "Start Rate". Period - This is the frequency of adjustments, the longer the rate remains fixed, the better the loan is for the borrower. Typically, the shorter this is the lower the rate, since there are more opportunities to adjust upwards. Floor bank loan 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 bank loan from ever adjusting lower. An "A Paper" loan typically has either no Floor or 2% below start. Initial Change Cap - ARM loans have a specified maximum first adjustment that is typically higher than allowed on subsequent changes. Periodic Change Cap - The maximum interest bank loan 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 bank loan 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 have different ways of structuring