Interest Rate Cap Structure

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Dictionary Says

Definition of 'Interest Rate Cap Structure'

Limits to the interest rate on an adjustable-rate loan - frequently associated with a mortgage. There are several different types of interest rate cap structures including an initial, periodic and lifetime interest rate cap structure. The initial cap is a value that limits by what amount the interest can adjust at the mortgage’s first interest rate adjustment date. The period cap is a value that limits by what amount the interest rate can adjust at each subsequent adjustment date. The lifetime cap limits the total amount by which the interest rate can adjust over the life of the mortgage. 
Investopedia Says

Investopedia explains 'Interest Rate Cap Structure'

The interest rate cap structure of a mortgage gives holders protection from large interest rate increases. For example, 5-1 fixed period ARMs usually offer the borrower a choice between a 2-2-6 or a 5-2-5 interest rate cap structure. (The first number refers to the initial cap, the second number to the periodic cap, and the third number to the lifetime cap.) If the fully indexed interest rate on the mortgage were to increase substantially before the first interest rate adjustment date, but stay below a 5% lifetime cap value, the borrower would be better off choosing the 2-2-6 interest rate cap structure. However, the dilemma to this is that borrowers can never truly be certain where interest rates will head next.
Search results for

'Interest Rate Cap Structure'

  • CFA Level 1 Study Guide - Derivatives - Interest Rate Caps and ...

    http://www.investopedia.com/exam-guide/cfa-level-1/derivatives/interest-rate-caps-floors.asp
    ... 14.29 The Term Structure of Interest Rates; 14.30 Types of Yield ... 14.34 London Interbank
    Offer Rate (LIBOR); 14.35 Bond Valuation Basics; 14.36 Cash Flow; ...

  • Subprime Is Often Subpar

    http://www.investopedia.com/articles/pf/07/subprime.asp
    ... An interest rate cap structure limits the amount by which, and the rate at which,
    the fully indexed interest rate can increase at each scheduled interest rate ...

  • Managing Interest Rate Risk

    http://www.investopedia.com/articles/optioninvestor/08/manage-interest-rate-risk.asp
    ... in a series would be priced at different rates, unless the term structure is flat. ...
    of interest rate calls is referred to as an interest rate cap; a combination ...

  • CFA Level 1 Study Guide - Derivatives - Interest Rate Options vs. ...

    http://www.investopedia.com/exam-guide/cfa-level-1/derivatives/interest-rate-options-versus-fras-forward-rate-agreements.asp
    ... 14.29 The Term Structure of Interest Rates; 14.30 Types of Yield ... 14.34 London Interbank
    Offer Rate (LIBOR); 14.35 Bond Valuation Basics; 14.36 Cash Flow; ...

  • Got A Good Mortgage Rate? Lock It Up!

    http://www.investopedia.com/articles/pf/08/lock-mortgage-rate.asp
    ... the lock agreement. The cap permits the guaranteed rate to rise if
    interest rates rise prior to settlement. The cap does ...

  • Finding Big Yields In Small Cap Real Estate

    http://stocks.investopedia.com/stock-analysis/2011/Finding-Big-Yields-In-Small-Cap-Real-Estate-IYR-ROOF-UBA-UBP0726.aspx
    ... Their sheer size has given large cap REITs many ... large asset bases and the zero interest
    rate environment, larger ... due to REITs 90% tax structure), both retail ...

  • CFA Level 1 Study Guide - Derivatives - What is a Derivative? ...

    http://www.investopedia.com/exam-guide/cfa-level-1/derivatives/what-is-a-derivative.asp
    ... 14.29 The Term Structure of Interest Rates; 14.30 Types of Yield ... 14.34 London Interbank
    Offer Rate (LIBOR); 14.35 Bond Valuation Basics; 14.36 Cash Flow; ...

  • Home-Equity Loans: The Costs

    http://www.investopedia.com/articles/pf/05/041905.asp
    ... ask about the cap on the interest rate and find ... the payment can go before the cap
    applies. ... Mortgage, Understanding the Mortgage Payment Structure and Mortgages ...

  • CFA Level 1 Study Guide - Alternative Investments - Real Estate ...

    http://www.investopedia.com/exam-guide/cfa-level-1/alternative-investments/real-estate-calculations.asp
    ... 14.29 The Term Structure of Interest Rates; 14.30 Types of Yield ... 14.34 London Interbank
    Offer Rate (LIBOR); 14.35 Bond Valuation Basics; 14.36 Cash Flow; ...

  • CFA Level 1 Study Guide - Securities Markets - Characteristics of ...

    http://www.investopedia.com/exam-guide/cfa-level-1/securities-markets/security-index-characteristics.asp
    ... 14.29 The Term Structure of Interest Rates; 14.30 Types of Yield ... 14.34 London Interbank
    Offer Rate (LIBOR); 14.35 Bond Valuation Basics; 14.36 Cash Flow; ...

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