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Types of mortgages >
Capped |
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Capped
rate mortgages
Capped rate mortgages are very similar to fixed rate mortgages
in so much as the rate cannot increase however unlike fixed rate
mortgages under a capped rate the rate can decrease if interest
rates fall.
A capped rate mortgage has an upper cap or limit at which point
the rate will not exceed. However if prevailing rates fall below
this rate then the rate within the plan will also fall subject
to lenders conditions if any.
The benefits of this type of mortgage deal is that you have the
certainty of your mortgage not exceeding a set limit but you
also have the possible benefit if rates reduce below the cap the
mortgage could also benefit from that reduction.
It should be noted that some lenders do have quite strict
conditions that govern when the rate will fall if it does and as
such it is important to thoroughly research each deal were
applicable.
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