capped rate mortgages

Capped Rate Mortgages

A capped rate mortgage puts a ceiling on the rate for a period of time. This means that the payments cannot go above the rate set during that time. It can, of course, change if the rates go down.

advantages of capped rate mortgages

* Gives you a guaranteed rate which your repayments cannot exceed.

* If interest rates fall, your repayments will reduce with them.

disadvantages of capped rate mortgages

* Usually the capped rate is higher than a fixed rate because repayments can fall with interest rates.

* Usually, you have to pay application and/or arrangement fees.

* Early repayment charge.

* If interest rate falls below your fixed rate you may be left paying a higher rate than the variable rate.

collared rate mortgages

Some capped rate mortgages have a 'Collar'. This means that the lender sets an interest rate below which, the mortgage cannot fall. These may offer a better Capped rate but if the interest rate falls below the 'Collar' rate, then you do not benefit.

Your property may be repossessed if you do not keep up repayments on your mortgage.

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