How does the Mortgage with Cap work?

Not everyone knows that in addition to the fixed or variable rate mortgage, Scaramouche is able to offer and provide its customers with another interesting “hybrid” product : the variable rate mortgage with CAP.

What is the Mortgage with Cap and how does it work? This is a medium to long-term loan: the customer retains the same benefits as the variable-rate mortgage, but has the option to place a maximum ceiling on raising interest rates upon subscription.

Let’s find out better in this guide what is the mortgage with Cap, how it works and what the advantages are.

Mortgage with Cap: what are its characteristics?

mortgage loan

As already mentioned, the loan with Cap is a variable rate mortgage in which the amount of interest varies according to the Euribor trend but, unlike the standard variable, the CAP option allows the subscriber to set a ceiling a priori maximum (the so-called CAP rate) to the interest rate to “protect themselves” from any upward oscillations of the wise.

The operation of this credit product makes us understand what the advantages are for the borrower: the interest rate can never go beyond a certain limit predefined by the contract itself.

If the interest rate should increase, and exceed the pre-established threshold, the borrower will never have to pay a rate higher than the threshold established in the contract.

In this way, we understand the ” protection ” and security deriving from a variable mortgage with Cap.

Fixed-rate and the variable rate formula.

Fixed-rate and the variable rate formula.

In the event that the interest rate is lower than the maximum limit, the calculation of the interest would be based on that of the variable rate mortgage.

This is why we speak of a “hybrid” mortgage : this name refers to the “compromise” between the fixed rate and the variable rate formula.

Therefore, the benefits for the subscriber of a variable rate mortgage with Cap are attributable to the following:

  • benefit from the fall in market rates;
  • protect yourself from excessive fluctuations in the interest rate with the maximum ceiling;
  • know from the beginning the maximum amount that the installment to be paid can reach.

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