When you apply for a mortgage loan, there are a few mortgage loan questions that you need answered before you sign the papers. One of these questions has to do with the cap on your mortgage interest rate.

What is an interest cap?

When you have an adjustable rate mortgage (ARM), you will find that the interest rate can change every quarter, or even every month. And, as mortgage interest rates go up (as they are likely to do again soon), you pay more on your mortgage loan. This is where the interest cap comes in. The interest cap is the limit on how high the interest rate is allowed to go. This can be either over the life of the loan, or for every adjustment period.

You should also take into account the maximum principal and interest (P & I) that might be on the mortgage loan. It is a good idea to look into these items before signing a mortgage loan.

Tags: mortgage loan payment, personal finance, financial planning, finances,
ARM, , mortgage loan, interest cap