Capped Mortgages explained - Apply for a Capped Mortgage

Would you like to find a mortgage which allows you to budget more easily, and with the potential to save money? Capped mortgages are suitable for potential home owners who want to enjoy lower interest rates but don’t want to pay above a certain amount every month. Similar to a standard variable rate, capped mortgages have fluctuating interest rates, however the upper rate can’t rise above an agreed percentage.

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Capped Mortgages – risks and costs

Once your capped rate period ends your mortgage will be transferred back to the SVR (standard variable rate). Be aware that you could be charged a redemption fee if you decide to end your mortgage scheme earlier than previously agreed. In addition, some mortgage providers incorporate overhanging redemption penalties into their terms and conditions. This basically means that there is a redemption charge, even after the capped rate period finishes. Seek out the advice of an impartial mortgage adviser before you; find a mortgage with a capped rate, in order to avoid unnecessary fees and penalties.

Capped Mortgages Pros

Capped mortgages can be advantageous as they carry a fixed range of rates. Borrowers can budget more easily as they can plan for their monthly repayments, they give peace of mind and security as you know that payments will never go above the pre-agreed limit.

Unlike fixed rate mortgages, borrowers can potentially save money with capped mortgages when the interest rate falls.

Unlike a variable rate mortgage a capped mortgage can help you financially prepare and budget for the future as you agree to upper ‘capped’ limit to the rate, however unlike a fixed rate mortgage you can potential benefit from lower Bank of England base rates.

Capped Mortgages Cons

There may be charges if you end capped mortgages earlier than agreed. You may have to pay an arrangement fee when applying for your mortgage. A capped rate of interest is typically higher than a fixed rate, so compare and contrast mortgage types before you sign up.

Usually however capped rate mortgages, just as they have an upper limit will have a minimum rate called ‘collar’ that they will fall to, therefore if interest rates drop substantially.

Where can I find a good deal on a Capped Rate Mortgage?

Capped rates are not always available from lenders and choice is limited so if you are considering applying for a capped rate mortgage using a comparison site or broker is a good way of getting access to a multitude of quotes from different mortgage lenders.

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