Life-of-loan cap

The life-of-loan cap is the maximum interest rate the loan can adjust to during the loan term (typically 30 years). Many lenders offer life-of-loan caps ranging from 9.95% to 11.95% and up. Once your interest rate hits the designated life-of-loan cap value, it will stay at the 9.95% rate (or the applicable life-of-loan cap on your loan) until interest rates or more specifically, your index value, begins to decline once again.

The life-of-loan cap is not a negotiable feature. It is a predetermined value established by the lender. Shop around for the lowest possible life-of-loan cap. Naturally, the lower the life-of-loan cap, the more interest you can potentially save over the term of your loan.