What does an interval cap restrict?

An interval cap is designed to limit how much the interest rate can increase with each adjustment period in an adjustable-rate mortgage (ARM). This means that during each adjustment, even if the market rates rise significantly, the interest rate you pay on your mortgage can only increase by a predetermined maximum amount. This is crucial for borrower protection, as it ensures that the borrower is not subjected to sudden and exorbitant increases in their mortgage payments.

The other options address different aspects of loans or mortgages. The overall loan amount and the lender's fees pertain to different parameters of the borrowing process, while the duration of the mortgage deals with the term length, which is unrelated to the interest rate adjustment mechanism that the interval cap specifically addresses. Therefore, focusing on the capped rate change reflects the core function of this cap in an adjustable-rate mortgage scenario.