Capped Rate Mortgages

What Is A Capped Rate Mortgage?

A capped rate mortgage is a cross between a discounted rate mortgage and a fixed rate mortgage. It is still linked to the standard variable rate mortgage (SVR) but it is capped at a predetermined percentage. If the standard variable rate goes up beyond this, your mortgage payment will be calculated on your capped percentage thus saving you paying at the higher rate, if it falls below your capped rate then your monthly mortgage payment will be calculated at the lower rate.

What Benefits Do Capped Rate Mortgages Offer?

Capped rate mortgages allow the flexibility of the mortgage payments going down if the rate is falling, and the security of knowing that your mortgage rate will not rise above the predetermined percentage. The capped rate period can vary but typically may be 2, 5 or 10 years.

Are There Any Pitfalls To Capped Rate Mortgages?

As with fixed rate mortgages, there could be tie in periods which could result in a redemption fee also if you wanted to change your mortgage or pay it off within the discounted period you could end up paying a large fee. In addition the tie in periods can be extended, so you may find yourself tied to the lender for a period of time after your capped rate mortgage is complete, for this reason it may be best to shop around to find a capped rate mortgage deal where there is no or little extended tie in period. This is where ZeroPercentInterest.com may be able to help you compare mortgages.

If you are in any doubt about your mortgage it is always best to consult with an independent financial advisor before committing to the mortgage.