Friday, July 13, 2007
Capped Rate Remortgage
"This type of mortgage offers security throughout the term of the loan that the rate will not go beyond a certain maximum."
If your current mortgage is coming to an end and you are looking to re-mortgage to a product that offers protection with mortgage rates, a capped rate re-mortgage could be for you. A re-mortgage is simply replacing the existing mortgage for another one. However, it can be for a different kind of mortgage.
This type of mortgage offers security throughout the term of the loan that the rate will not go beyond a certain maximum. You will also have the option to reduce your mortgage rates should the Bank of England Base rate go down. Therefore, the monthly repayments will always remain the same unless the base rate alters which will then reduce your monthly repayments. The capped rate will be agreed from the start of the re-mortgage period; therefore, you will always be aware of the maximum rate that the mortgage product can peak at as the rate will be capped at a certain point.
Re-mortgaging to a Capped Rate means that you can tie in to the agreed rates for a maximum five year period; however, the terms can differ depending on lender. All mortgage rates are set around the Bank of England base rate. Any changes to the base rate will affect the lenders mortgage rate, if the base rate is reduced, the lenders standard variable rate will go down which in turn will decrease your monthly payments. Some lenders will impose a minimum rate limit, meaning that the capped rate isn’t allowed to go below a certain level. This particular product allows you to the best of both worlds as, if interest rates fall, you benefit from paying monthly repayments at a lower interest rate. If they rise, you are protected from the capped rate perspective as you know that the rates are never allowed to exceed a certain point.
Prospective mortgage applications can be made via your existing lender or by visiting other high street lenders. There is a lot of information to digest regarding re-mortgaging and should you require further clarification on capped rate products that are available, its often best to check with a financial advisor who will usually provide free and impartial advice on the most suitable mortgage deal for you. It pays to research thoroughly as the mortgage market is very competitive, therefore, you could grab yourself a great rate if you check all the relevant options available to you.Interest rates on capped rate mortgages are typically higher than a fixed rate mortgage product as you are able to lock-in to a particular capped rate for a number of years. You will be eligible to make your monthly repayments at an agreed rate, if the interest rates rise then you will be insured against your mortgage product going above a certain point (the cap). If interest rates reduce, you have the advantage of your mortgage rates going down to reflect the reduction. Therefore, a capped rate mortgage can offer you the benefits of insuring you against rate rises, however you might be paying above the standard variable rate (SVR) for the whole duration of the loan should interest rates remain the same.
In order for the re-mortgage application to be agreed, you must pass the relevant credit check performed by the lender. All lenders used this method to assess the suitability of the applicant in relation to the chosen mortgage product.You should be aware that even though you will be protected from any major rate rises, you could be repaying the mortgage on the basis that the agreed interest rate is higher than the SVR. Therefore, if you believe that mortgage rates are going to increase dramatically then this is the right type of mortgage product for you. The lender could also impose redemption penalties should you repay the mortgage earlier than the agreed term. This type of mortgage can also incur an arrangement fee which is payable by you to the lender.
This type of mortgage offers security throughout the term of the loan that the rate will not go beyond a certain maximum. You will also have the option to reduce your mortgage rates should the Bank of England Base rate go down. Therefore, the monthly repayments will always remain the same unless the base rate alters which will then reduce your monthly repayments. The capped rate will be agreed from the start of the re-mortgage period; therefore, you will always be aware of the maximum rate that the mortgage product can peak at as the rate will be capped at a certain point.
Re-mortgaging to a Capped Rate means that you can tie in to the agreed rates for a maximum five year period; however, the terms can differ depending on lender. All mortgage rates are set around the Bank of England base rate. Any changes to the base rate will affect the lenders mortgage rate, if the base rate is reduced, the lenders standard variable rate will go down which in turn will decrease your monthly payments. Some lenders will impose a minimum rate limit, meaning that the capped rate isn’t allowed to go below a certain level. This particular product allows you to the best of both worlds as, if interest rates fall, you benefit from paying monthly repayments at a lower interest rate. If they rise, you are protected from the capped rate perspective as you know that the rates are never allowed to exceed a certain point.
Prospective mortgage applications can be made via your existing lender or by visiting other high street lenders. There is a lot of information to digest regarding re-mortgaging and should you require further clarification on capped rate products that are available, its often best to check with a financial advisor who will usually provide free and impartial advice on the most suitable mortgage deal for you. It pays to research thoroughly as the mortgage market is very competitive, therefore, you could grab yourself a great rate if you check all the relevant options available to you.Interest rates on capped rate mortgages are typically higher than a fixed rate mortgage product as you are able to lock-in to a particular capped rate for a number of years. You will be eligible to make your monthly repayments at an agreed rate, if the interest rates rise then you will be insured against your mortgage product going above a certain point (the cap). If interest rates reduce, you have the advantage of your mortgage rates going down to reflect the reduction. Therefore, a capped rate mortgage can offer you the benefits of insuring you against rate rises, however you might be paying above the standard variable rate (SVR) for the whole duration of the loan should interest rates remain the same.
In order for the re-mortgage application to be agreed, you must pass the relevant credit check performed by the lender. All lenders used this method to assess the suitability of the applicant in relation to the chosen mortgage product.You should be aware that even though you will be protected from any major rate rises, you could be repaying the mortgage on the basis that the agreed interest rate is higher than the SVR. Therefore, if you believe that mortgage rates are going to increase dramatically then this is the right type of mortgage product for you. The lender could also impose redemption penalties should you repay the mortgage earlier than the agreed term. This type of mortgage can also incur an arrangement fee which is payable by you to the lender.
Labels: Capped Rate Remortgage
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