# Rate caps

> Rate caps limit how far an adjustable mortgage rate can move at the first reset, at each later reset and over the life of the loan. Worst-case example.

URL: https://mortgage-math-us.com/glossary/rate-caps/  
Last reviewed: 2026-10-29 · By the MortgageMath US Editorial team

## Quick answer

**Rate caps** limit how much the interest rate on an adjustable-rate mortgage can change: the initial cap at the first adjustment, the subsequent (periodic) cap at each later adjustment, and the lifetime cap over the whole loan, measured from the starting rate.

## Key facts

| Fact | Value | Source | As of |
|---|---|---|---|
| Caps on a 5/6 ARM (first/periodic/lifetime) | 2/1/5 | [Fannie Mae Standard ARM Plan Matrix](https://singlefamily.fanniemae.com/media/6951/display) | Oct 1, 2021 |
| Caps on 7/6 and 10/6 ARMs | 5/1/5 | [Fannie Mae Standard ARM Plan Matrix](https://singlefamily.fanniemae.com/media/6951/display) | Oct 1, 2021 |

## Reading cap numbers

Caps are written first/periodic/lifetime. Fannie Mae’s 5/6 ARM uses 2/1/5: up to 2 percentage points at the first reset, 1 at each six-month reset after that, and never more than 5 above the starting rate. On 7/6 and 10/6 ARMs the caps are 5/1/5, so the first reset alone can reach the lifetime ceiling.

## Worst case on a 5/6 ARM

*$300,000 5/6 ARM at an example 6.5% start, if every reset rises by the most allowed*

| From | Rate | Monthly payment |
|---|---|---|
| Month 1 | 6.5% | $1,896 |
| Month 61 | 8.5% | $2,261 |
| Month 67 | 9.5% | $2,451 |
| Month 73 | 10.5% | $2,645 |
| Month 79 | 11.5% | $2,842 |

Caps limit decreases as well as increases. Some ARMs cap the payment rather than the rate, which can let unpaid interest add to the balance; a [Qualified Mortgage](https://mortgage-math-us.com/glossary/qualified-mortgage/) can’t do that.

## Related terms

- [Adjustable-rate mortgage](https://mortgage-math-us.com/glossary/adjustable-rate-mortgage/)
- [Index](https://mortgage-math-us.com/glossary/arm-index/) and [margin](https://mortgage-math-us.com/glossary/arm-margin/), which set the rate the caps limit
- [Fixed vs adjustable-rate mortgages](https://mortgage-math-us.com/loan-types/fixed-vs-adjustable-rate/)

## Sources

- [Fannie Mae Standard ARM Plan Matrix](https://singlefamily.fanniemae.com/media/6951/display) — Rate caps on a Fannie Mae 5/6 ARM (first/periodic/lifetime); Rate caps on Fannie Mae 7/6 and 10/6 ARMs (first/periodic/lifetime) (Oct 1, 2021)
- [CFPB: What are rate caps with an adjustable-rate mortgage (ARM), and how do they work?](https://www.consumerfinance.gov/ask-cfpb/what-are-rate-caps-with-an-adjustable-rate-mortgage-arm-and-how-do-they-work-en-1951/)

_General information, not financial advice._