In a 2/6 rate cap, what does the "6" represent?

In the context of a 2/6 rate cap, the "6" signifies the maximum cap on any single adjustment. This means that for each adjustment period, the interest rate can only increase by a maximum of 6 percentage points from the previous rate. Understanding this is essential for borrowers as it limits how much their interest rate can fluctuate during each adjustment, providing a measure of predictability and protection against sharp increases.

This structure is particularly important when looking at adjustable-rate mortgages, as it helps borrowers plan for potential increases in their monthly payments resulting from interest rate adjustments. The first number, "2," refers to the maximum rate increase allowed at each adjustment period, while the "6" ensures that, despite how many times the interest rate adjusts over the life of the loan, it cannot exceed this threshold in a single instance.