Payment Cap

This Issue in United States

Payment Cap in the Context of Mortgage Refinancings

In this context, a definition of Payment Cap may be distilled, worded as follows: A limit on the amount that your monthly mortgage payment on a loan may change, usually a percentage of the loan. The limit can be applied each time the payment changes or during the life of the mortgage. Payment caps may lead to negative amortization because they do not limit the amount of interest the lender is earning.