A mortgage which guarantees the interest rate charged will not rise above a certain level. But it may fall in line with variable rates. This kind of arrangement is not seen as often as some might wish.
As the name itself gives the impression, the interest rate is capped (it has a rider on it ) so that the borrower's monthly payments will be calculated using either the standard variable rate or the capped rate, whichever is lower. A capped rate mortgage in normal conditions is capped for a set period of time of between 1 year and 5 years.
This type pf mortgage gives the the idea that borrower wins in such kind of arrangement but it is the cosmetic look reality is quite different! In reality the cap is set at a level that the lender does not expect the variable rate to exceed for too long. If they didn't do this they could lose out quite heavily. In general notion it seems that a capped rate mortgage puts a maximum limit on the interest rate that you have to pay. You therefore gain the security of having a 'ceiling' or upper limit to the amount that the lender can increase the interest payable on your mortgage.
This period of capped interest is for a specified period only; typically between one and five years. At the end of the specified period your mortgage will usually revert to a variable rate.
However, it is possible to find a capped rate mortgage that can last for the entire life of the loan. Although this arrangement initially sounds attractive, some capped rate mortgages also have a 'collar' or lower limit below which the interest on your loan cannot fall. Just complete the analysis of capped loan mortgage and allow us to serve you with best available option in the market. For any related clarification contact us through any available mode of communication.
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