There are lots of different types of mortgages, with some being more complicated than others. In this, article, we are going to look at fixed-rate mortgages and how they could be right for you.
A fixed-rate mortgage is exactly what it says on the cover. By taking out a fixed-rate mortgage, your interest rate will remain at the same rate throughout your mortgage term.
The length of a mortgage term can differ from one deal to another. It depends on how long you fix your deal in for.
The lowest fixed-terms often come with the lowest interest rates; although this is positive, on the contrary, it also means that you’ll have to renew your mortgage product through a remortgage in Durham more frequently.
Effectively, this could mean that it’s more beneficial to fix in your mortgage over a longer-term on a fixed-rate mortgage.
You’ll have to decide whether you’re willing to search for a new fixed-rate deal every two to three years or not. If you don’t want to be frequently searching for new deals, a medium to long-term product may be for you. You’ll have to consider your current and future personal and financial circumstances when deciding how long you’re going to fix your mortgage for.
Five-year fixed rates are popular choices; they add the security of consistent monthly payments. These lock in deals also have negatives. For example, if interest rates drop whilst you’re locked in, you will end up paying more than you would’ve been had you taken out a product with a shorter term.
You can fix in your mortgage for an even longer period of time if you feel like that’s the right thing for you. The options are usually limited, however, you can usually find seven to ten year fixed products. These types of products aren’t usually very popular, as you’re committing to a product for a whole decade! During this time, better rates are very likely to come available. You should know that these are usually the most expensive fixed-rate products available to customers.
On top of interest rates and payments, you’ll also have to consider mortgage arrangement and booking fees.
A booking fee may be charged for an appointment with a mortgage advisor in Durham. At Durhammoneyman, we do not charge a booking fee, we offer a free mortgage consultation to every customer.
Mortgage arrangement fees are charged upon completion, therefore, if you take out short, fixed-term products, you may end up accumulating a large number of costs just for arranging your mortgage. This is one of the benefits of taking out a medium fixed-term mortgage, you won’t have to constantly pay for arrangement fees.
Otherwise known as ERC’s, you can receive an ERC when you overpay your mortgage or pay back your mortgage too early.
Sometimes people forget about ERC’s or overpay by accident, whereas others can overpay on purpose. This is where the positives of overpaying can occasionally outweigh the negatives.
In a situation where your fixed-mortgage term is approaching its end and you can see that there are much better interest rates readily available, it may benefit you more to overpay and receive an ERC so that you can access these rates. Perhaps it’s a limited product offer that you’ve received or a deal that you’ve found and you want to lock into right away, sometimes tactically receiving an ERC can benefit you in the long run.
You’ll find that some ERC’s won’t be too costly. They are 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 charge is 2%, you’ll receive a £1,600 early repayment fine. In the grand scheme of things, this figure does not seem too bad.
As a mortgage broker in Durham, we always suggest that do your research jumping into a deal. We would also recommend that you don’t chase ‘headline’ deals; don’t let them mislead you, the cheapest/lowest rates can come with the highest arrangement fees!
For help securing a great fixed-rate mortgage rate and remortgage advice in Durham including how to save costs on various fees that come with getting a mortgage, get in touch with our brilliant mortgage team today.