What is Payment Cap?

The payment cap was developed to protect the customer from high rates. The payment cap is usually used in the adjustable-rate mortgage. This cap limits the monthly payments what a borrower has to pay on his mortgage. And this cap is also the maximum amount what the customer has to pay for one month of loan. It’s important to know that however the payment cap is protecting the borrowers it doesn’t have any effect on how much interest the lender is charging thus the person might end up in negative amortization.