Before you apply for a mortgage, it’s important to do some research into the different products available out there so you can make an informed decision, one that’s right for you and your family situation.
You’ll find that you’re presented with a choice of variable-rate mortgages, tracker mortgages, discount mortgages, standard variable-rate mortgages and fixed-rate mortgages… and they all have their own distinct pros and cons.
Where fixed-rate mortgages are concerned, these are a great option for anyone who enjoys peace of mind where their finances are concerned. These products guarantee that your interest rate stays the same for a specific amount of time, agreed upon with your particular lender.
In terms of payments, this means that you pay the same each month, which can make it easier to manage your finances. In comparison, variable rate mortgages like discounts and trackers can fluctuate in terms of payment amount.
You are currently able to fix mortgage rates for one, two, three, five, seven, ten or 15 years. Bear in mind that the longer the fixed-rate period is, the higher the interest rate will be, as it’s harder for lenders to predict what’s going to happen well into the future where the market is concerned.
Most fixed-rate mortgages are either two or five-year deals and it comes down to your individual circumstances as to which would be most appropriate. For example, if you plan to move home in the near future, then you might benefit from a two-year deal rather than a five, to give you a bit more freedom.
While this may well sound quite an attractive option, there are some other factors you need to bear in mind when considering a fixed-rate mortgage.
Early repayment charges are certainly a consideration, charged as a percentage of the outstanding balance. Upfront fees are also something to think about (also known as product, arrangement or completion fees), as fixed-rate mortgages often come with these.
When your fixed rate period comes to an end, you’ll be transferred onto your lender’s standard variable-rate (SVR) mortgage, which will mean your repayments can change and fluctuate at any time.
Remortgaging is a good move if you’re coming to the end of your fixed rate period, either with your current lender or someone else. This will mean you don’t move onto the SVR mortgage deal, potentially saving you quite a lot of money.
The main benefit of a fixed-rate mortgage is that your interest rate won’t rise for the entire deal period, no matter what’s happening in the wider market. This makes it an attractive option for people on a tight budget or those who prefer the stability represented by a fixed monthly repayment.
Looking for a remortgage adviser? Get in touch with Tulip Mortgages today.