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LOAN CAP PROTECTION
If you plan to finance a home with an adjustable rate mortgage (one that goes up and down with the interest rate at periodic intervals) make sure you focus on the presence or absence of interestrate “caps”.
Caps are “security blanket” ceilings. They represent a guarantee from the lender that you will not be required to pay more than an agreed-upon maximum rate no matter how high interest rates may skyrocket.
The two most common rate caps sheild you against total rate increases beyond, say four to five percentage points through the entire term of the loan. Annual caps are usually in the 1 to 2 percent range, offering protection against sudden, sharp run-ups.
Remember that these consumer features are optional and valuable. If you are offered an adjustable loan rate without a cap, you should be getting a price break to compensate you for the additional risk.
If there is anything we can do to help you in the field fo real estate please stop in at EILEEN M. DAY, Realtor, The Clopton House, Washington, Va. 22747. Phone 675-3003. We’re here to help. i i * . . ' :
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