Capped Home Loan

April 22nd, 2010 No Comments
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Capped Home loan“Capped”, it usually means that there is a limit or there is a certain boundary that cannot be crossed.   A capped loan similarly would mean that the interest rates have a limit set to them, and cannot go above a certain point.  This is of course limited to a certain period, which may be a number of years.

Due to the fact that a loan is capped, this simply means that no matter how high the interest rate goes up, the boundary is what would have been agreed upon in the capped loan contract.  However, when interest rates go down, the interest you pay can also go down.  This is because the cap is only applicable upwards and not downwards.

Currently, most capped home loans on offer have a 7.5% cap until 2012.  Any interest above 7.5% would not be allowable.    The lowest capped loan on offer is set at 7.49%, so one has to decide based on the product features which capped rate loan would be most suitable. The expert consensus, however, seems to be that interest rates will stay low for the next few years. These rates will then slowly go up once again as the effect of the subprime mortgage crisis in the United States slowly settles, and the real estate market begins to recover.

People who are on the fence can therefore, take a chance with this loan product.  It has the flexibility of a variable rate loan, and the cap is akin to a fixed rate loan where the rates are inflexible.

With the help of the experts on home loans, it would be much easier to gain access to a capped home loan.  They can also advise you if getting such a loan would be wise, and even offer different products which may compare in price to such a loan.  So do not hesitate to try and benefit from various home loan products, as they could save you a lot of time and effort.

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