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Capped Home Loans
What is a Capped Home Loan?
Capped home loans have a security feature similar to fixed home loans. Capped home loans however are not fixed at the one interest rate for a period of time, they are semi-variable.
Their interest rate can reduce in a similar fashion to rate reductions for variable rate mortgages. When rates increase, a capped home loan interest rate will only increase up to a specified rate according to the individual lender. The capped rate period is for a limited length of time and can vary according to each loan’s terms.
For example, a capped period can be for the first year of the loan, for the first two years, three years or five years, depending upon the loan terms.
Benefits of a Capped Home Loan?
Capped home loans can be beneficial when interest rates are expected to increase but are generally at a higher rate than standard variable interest rates.
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Disclaimer
This article is over two years old, last updated on September 18, 2009. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent home loans articles.
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Product database updated 26 Nov, 2024
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