When you enter the mortgage world, you will find that there is not just one mortgage for everyone. They vary depending on different circumstances with some being more complex than others. In this article, we will be looking at just one of the types of mortgage, fixed-rate mortgages. This one has increased in popularity over the years and is seen to be the most common one.
As stated in the name, a fixed-rate mortgage is where you are taking out a fixed-rate mortgage where your interest will be consistent throughout your mortgage term.
The duration of the mortgage term can vary depending on the deal you are on. It also depends on how long you fix your deal.
For example, the lowest-terms usually have the lowest interest rates. Even though this is good, it does mean you will need to renew your mortgage product via a Remortgage in Durham more often.
This is one of the reasons why fixing your mortgage deal over a lengthy period on a fixed-rate mortgage can be more beneficial.
It’s all down to whether or you are willing to look for a new fixed-rate deal every two to three years or not. A medium to long-term product is perfect for those who don’t want to frequently search for new deals. Like with many financial commitments, you will need to look at your current and future financial circumstances when deciding the duration you’re going to fix your mortgage for.
One of the popular choices amongst fixed rates is five-year fixed rates with one of the reasons being the security of consistent monthly payments. On the other hand, there are some negatives to this. If the interest rates drop when you are locked in, this will result in paying more than you would’ve been had you taken out a product with a shorter term.
It can be possible for you to fix in your mortgage for an even longer period of time if you feel this is the best option for you. In many cases, the options are limited, but you can find seven to ten-year fixed products. You may find these types of products aren’t usually very popular because you’re committing to a product for a whole decade! Within this time, better rates are usually to come available. Keep in mind that these are usually the most expensive fixed-rate products available to customers.
Along with interest rates and payments, you will have to factor in mortgage arrangements and booking fees.
It is likely that a booking fee would be charged if you do attend an appointment with a Mortgage Advisor in Durham. Unlike some mortgage brokers, we do not charge a booking fee, we offer all our customers a free mortgage appointment.
You will be charged upon completion, therefore, for those you take out short, fixed-term products, it could result in you accumulating a large number of costs just for sorting your mortgage. Whereas, with a medium fixed-term mortgage, you won’t be required to constantly pay for arrangement fees.
Also known as ERC’s, you can receive an Early Repayment Charge when you overpay your mortgage or pay back your mortgage too early.
In some cases, people forget about ERC’s or overpay by accident, while some overpay on purpose. This is just one of the cases where the positives of overpaying can sometimes outweigh the negatives.
When your fixed-mortgage term is coming to an end, you may find that there are much better interest rates already available. This where overpaying and receiving an ERC can be beneficial as you are accessing them better rates. In circumstances where it’s a limited product offer that you have received or a deal that you have found and you want to lock into right away, this is where an ERC can be helpful in the long run.
Normally, ERC’s aren’t too costly. The amount you will be charge is calculated by the remaining amount left on your mortgage. For example, if you have a total of £80,000 left on your mortgage and the ERC is 2%, you’ll receive a £1,600 early repayment fine. Overall, this figure does not seem too bad.
Before you fo jump into a deal, as an expert Mortgage Broker in Durham, we do recommend you carry out some research. One thing that is best to avoid doing is going for ‘headline’ deals as these are a way to mislead with their cheap rates but the high arrangement fees!
Seeking Remortgage Advice in Durham can help you secure great fixed-rate mortgage products. As well as this, it can also provide you with further information on ways to save costs on various fees that are a part of getting a mortgage. Contact us to speak to one of our hard-working Mortgage Advisors in Durham.
To learn more about the other mortgage types out there, check out our article on the ‘different types of mortgage in Durham’.