ARM Cap
Direct definition
The maximum amount an adjustable-rate mortgage's interest rate can change at each adjustment and over the life of the loan.
Written by the Vabasso Mortgage Editorial Team · Reviewed against agency and federal sources · Read our editorial policy for how we research and review mortgage content
Plain-English explanation
ARM caps come in three parts: an initial cap on the first adjustment, a periodic cap on later adjustments, and a lifetime cap on total change from the starting rate.
Why it matters
Caps limit worst-case payment shock when the rate resets.
Where you may see it
- Mortgage note
- ARM disclosure
- Loan Estimate
A real-world example
A 5/6 ARM with 2/1/5 caps starting at 6.00% could adjust as much as 2% at first reset, up to 1% at each later reset, but never more than 5% above the start rate.
Educational and illustrative only
A common misunderstanding
Caps don't prevent your payment from ever changing — they only limit how much and how fast the rate can move at each adjustment.
Ask Vabasso AI
This glossary provides general educational information. Mortgage terminology, qualification methods, forms, timelines, fees, program rules, and legal meanings may vary by lender, investor, loan program, property, occupancy, state, and transaction. Definitions do not represent loan approval, legal advice, tax advice, or a commitment to lend.
- Author
- Vabasso Mortgage Editorial Team
- Reviewed by
- Vabasso Mortgage Licensed Advisory Team
- Last reviewed
- July 30, 2026