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What are Capped Rate Mortgage

Capped rate mortgages are not different from fixed rate mortgages, as they offer a capped interest rate, which means that the interest rate will not exceed the limit agreed upon, for a certain period of time. The difference that separates capped rate mortgages from fixed rate mortgages is the fact that in a capped rate mortgage, if the bank interest rates decrease, the interest rate charged on your mortgage will be reduced accordingly, which will consequently decrease the amount your mortgage repayments.


Advantages & Disadvantages of Capped Rate Mortgages

The greatest advantage of capped rate mortgages is that you do not get adversely affected by the rise in bank interest rates, and you can be sure of the rate you are paying. Since the only change it offers pegged to the bank interest rate is downward, it even further benefits you than just protecting from interest rate rise.

A fee is charged for capped rate mortgage, just like in the case of a fixed rate mortgage. The disadvantage of getting a capped rate mortgage is the fact that capped rates are very hard to find. Few lenders offer capped rates, and when they do, the rates disappear quickly from the market.

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