Look for it in the mortgage contract. The margin amount, commonly one to three percentage points, usually remains constant over the life of a loan. Other features Caps on interest. There are two types of interest- rate caps. Lifetime caps , required by law on all new ARMs and on assumptions, limit the interest-rate increase over the life of the loan.
Periodic caps limit the interest-rate increase from one adjustment period to the next.
For example, your mortgage contract could provide that should the index rate increase four points in one year, your rate could rise only two points. When rates rise rapidly, periodic caps cushion borrowers from overly steep payment hikes between one adjustment period and the next. Caps on payment. Payment caps limit payment increases to a percentage of the previous payment. At some point, you will be required to begin making monthly payments large enough to pay off all the principal and interest you now owe over what remains of the loan term.