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  Payment Cap Definition
Payment Cap The maximum amount that your monthly loan payments can reach is referred to as your payment cap. This is intended to protect you from skyrocketing monthly mortgage payments if you have an adjustable rate mortgage. It is important to remember that loans with a payment cap may face a negative amortization if interest rates rise high enough that your monthly payment does not cover the cost of the loan's interest. In general, a rate cap is a better option than a payment cap.

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