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A capped rate mortgage is similar to a
variable rate mortgage except there is a level of protection provides
against rising interest rates.
With a capped mortgage the maximum increase
that can be expected under the agreement is limited to the level
of the cap. Your payments go up if mortgage rates rise but are guaranteed not to go above a set level (the cap) during the period of the deal.
In addition, unlike fixed rates, a capped rate mortgage allows you to benefit from low periods of interest, because a capped rate can fall if lending institutions lower their variable interest rates below the level of the cap set.
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