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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.
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