2007-01-10 08:52:13 · 7 answers · asked by pinky 1 in Business & Finance ➔ Renting & Real Estate
A capped Mortgage is where the interest rate is capped at a percentage above the base rate, meaning that if the base rate increases your rate stays the same, if it lowers your will reduce. whats important is that you do not pay more. Its a good thing to have, IF the base rate is set to increase. caution that you will have a higher interest rate so calculate that you will be better off. do your home work and shop about.
2007-01-10 08:58:06 · answer #1 · answered by MIKE C 2 · 0⤊ 1⤋
A capped mortgage is probably referring to an Adjustable Rate Mortgage (ARM) which has interest rates that are capped (maximum rate charged) over different time periods. A typical 5 Year ARM would have caps of 5/2/5, which means it is fixed for the first 5 years. After the first fixed period, it would adjust to market rate at that time, and adjust yearly after that. The most it could go up is 5% at the first change, and 2% each year after that. However, it could not increase more than a total of 5% over the life of the mortgage.
Let's hope we never hit those caps, or the economy will be in trouble.
2007-01-10 09:00:09 · answer #2 · answered by g_danadwyer 1 · 0⤊ 1⤋
Basically, a capped mortgage is a variable rate mortgage with a capped limit beyond which the rate paid will not exceed!!
2007-01-10 10:38:43 · answer #3 · answered by CEESONE 4 · 0⤊ 0⤋
A capped rate mortgage is ideal for those who would like to know the most they will ever have to pay each month for their mortgage, but at the same time benefit by paying less if interest rates fall.
The loan has a maximum interest rate over which you will not be charged for a set period. However, if the lender’s variable rate falls below the capped rate, your interest rate also falls.
Since the capped rate offers this dual benefit, a lender will usually set a higher rate for a capped mortgage over, say, three years, than it will charge on a fixed rate for the same period.
2007-01-10 08:55:56 · answer #4 · answered by richard_beckham2001 7 · 0⤊ 1⤋
A capped mortgage is a variable rate mortgage with a capped limit beyond which the rate paid will not exceed.
2007-01-10 08:56:39 · answer #5 · answered by Soupy 3 · 0⤊ 1⤋
A capped mortgage is a thing that plays for its building societys or banks at least once,
2007-01-10 08:56:42 · answer #6 · answered by Anonymous · 0⤊ 1⤋
The rate can go down with normal base rate changes, but can only go up to the rate you have capped it at.
ie..... if you cap it at, say, 5.5%, and the interest rate goes up to 6%, you still pay 5.5..... but will pay lower if the base rate drops.
2007-01-10 08:57:29 · answer #7 · answered by Anonymous · 0⤊ 1⤋