There are many different types of mortgage available and it can be confusing to know
which is right for you but for first time buyers and those who are not into taking risks when it comes to interest rates, a capped mortgage might well be the best option. So what is a capped mortgage and what benefits can it offer and to who?
A capped mortgage is essentially a combination of the best bits of the fixed and variable rate mortgage types; as with a tracker mortgage, when you choose a capped rate mortgage you will start out on a variable rate but unlike a tracker mortgage where your repayments are controlled by interest rates no matter how high or low they go, with a capped mortgage repayments are controlled by interest rates but only up to a pre-agreed and arranged level. This means that while your repayments will go up and down, they will never go above a certain level and you wont get any nasty surprises, essentially meaning that you get the sense of security associated with a fixed rate mortgage.
But dont jump into a mortgage on the basis that it sounds like a good deal, make sure that you get sound financial advice from professional mortgage brokers that you can trust or that have been recommended to you. The things to think about when it comes to deciding whether a capped mortgage is right for you are as follows:
Make sure that you understand the rate at which you start off paying with the capped mortgage deal on offer, ideally this should be low if it is to be worthwhile so do a comparison between the starting rate of the capped mortgage and the other types of mortgage you are considering.
Ask the mortgage broker to define exactly when the capped rate will end so you can judge whether this is likely to be just before interest rates rise again.
Check that you are happy and can afford to settle the mortgage repayments even at the cap, in other words at the highest these repayments will be during the agreed period.
As with all financial discussions, it is important to fully understand your options before you commit to anything by signing on the dotted line; a reputable whole of market mortgage broker should be able to put you in the picture when it comes to the different types of mortgage and which ones are available to you.