Life Cap

Definition - What does Life Cap mean?

A life cap is a legal codicil in a mortgage loan that limits the interest rate that can ever be charged over the lifetime of the mortgage. This is a beneficial term that is legally required to be included on mortgages of longer terms in order to protect the lender against future uncertainties relating to the markets and the prevailing interest rate at any point in the future.

Justipedia explains Life Cap

If a life cap were not included on a mortgage and it was a variable-rate mortgage, it could potentially make the mortgage exponentially more expensive to pay off.

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