Capped Rate Mortgages
Capped rate mortgages are a type of variable rate mortgage, where the interest rate you are charged is limited, or capped, at a certain rate for a period of time. Because of this interest rate cap your payments cannot rise above a certain point. Capped mortgage rates are normally only available for an introductory period which can be from two to five years. This mortgage type is one of the most uncommon as a limited number of lenders offer capped rates across the whole market.
Capped mortgages guarantee that your payment will not go above a certain level, but as variable-rate they also allow you to benefit from interest rates going down which leads to lower payments.
This mortgage type is the only rate type other than fixed-rate mortgages, that provides you with payment security. However, as you are paying for the security which the cap provides, this rate type tends to offer higher rates than equivalent fixed, tracker and discounted rate mortgages.
Once your capped rate mortgage period comes to end, your mortgage will then move onto your lender’s standard variable rate or tracker rate for the remainder of the term. You can also choose to remortgage a new deal at this point as well which is something we can help with (from about 6 months before the rate is due to end).
If you require further advice or guidance regarding capped rate mortgages, get in touch with us today for assistance from our mortgage and financial advisors.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up the repayments on your mortgage.
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