When you get an adjustable rate mortgage, the interest rate changes at set intervals in accordance with the market. In order to keep the rate from rising too high too fast, interest rate caps were introduced, to ensure the rate could only change at a manageable pace.
Read MoreA floating interest rate is also known as an adjustable or variable interest rate. The name comes from the fluidity of the interest rate that borrowers must contend with, as the interest percentage fluctuates throughout the life of the loan (for hybrid ARMs, the rate fluctuates after the introductory period ends). The interest rate is affected by the market’s margins or mortgage index.
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