Business and Personal Finance Dictionary

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• CAP RATE
  
  The highest rate that a borrower will pay within a defined time period. Examples are; the rate committed on a commitment letter or a mortgage pre-qualification (also known as a "rate hold"); or the maximum rate that will be paid by the borrower during the term of a "protected variable rate mortgage". A lender will usually have to incur a cost to insure against rate increases during the capping period. This insurance is called a "hedge".
  
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