What Is A Cap Loan
Cap loans, short for "capped rate mortgages," are a type of home loan where the interest rate is guaranteed not to exceed a certain level, providing borrowers with protection against rising interest rates. In this article, we delve into the intricacies of cap loans, discussing how they work, their pros and cons, frequently asked questions, and more. Table of Contents: Introduction How Cap Loans Work Pros and Cons Frequently Asked Questions (FAQs) Conclusion 1. Introduction: Cap loans offer borrowers a degree of security by capping the maximum interest rate they'll pay over the loan term. This article aims to demystify cap loans, exploring their mechanics, advantages, and potential drawbacks. 2. How Cap Loans Work: Cap loans function similarly to adjustable-rate mortgages (ARMs) but come with an added safeguard—the interest rate cap. This cap sets a maximum limit on how high the interest rate can rise during the loan term. If market interest rates exceed the cap, borrowe...