Wondering whether a fixed rate mortgage could be the best option for you? After all, they are one of the most popular mortgage products out there. But, you may be wondering what they are and what happens when the fixed rate mortgage ends. In a recent survey by the Home Move Conveyancing, they found that 35% of people claimed they didn’t know what the best mortgage was for them. Our team at Planet Mortgages are here to help you on your mortgage journey and we make it our mission to find you an out of this world deal! In today's blog, discover everything you need to know about a fixed rate mortgage.
What is a Fixed Rate Mortgage?
If you choose a fixed rate mortgage, your payments will stay the same until the end of the fixed rate period, even if interest rates fluctuate.
How Does a Fixed Rate Mortgage Work?
You’ll find that there are various mortgage products available on the market. Typically, the two main categories are variable-rate and fixed-rate mortgages. There are different types of variable mortgages with different terms and conditions associated with each. With variable rate mortgages, your monthly payments are likely to vary depending on the base rate it is tracking. A fixed rate mortgage gives you the security of knowing exactly what you’ll be paying each month.
Advantages of a Fixed Rate Mortgage
Depending on your personal circumstances, a fixed rate mortgage could be the perfect option for you. A mortgage is a huge commitment and it’s important to ensure that you’re as clued up as possible. Here are some of the benefits that come with a fixed rate mortgage…
Give yourself peace of mind
Knowing exactly how much you’ll be paying each month can provide you with security and peace of mind.
No sudden changes
The amount of interest you pay will always stay the same for the entirety of your fixed term, even if interest rates fluctuate.
Choose the term that suits you best
From two to five years, you’ll be able to choose how long the interest stays the same for. Some mortgage lenders even offer ten and fifteen year fixed terms, however, these are rare and may depend on your circumstances.
Disadvantages of a Fixed Rate Mortgage
For some, a fixed rate mortgage might not be the most convenient option available. If you’re unsure how long you might need your fixed rate period for, then it might be a good idea to consider other options. There’s usually an early repayment fee which can significantly add to your costs.
Falling interest rates
Variable rate mortgages allow you to take advantage of any drops in interest rates. A fixed rate means that you won’t see your payments decrease if interest rates were to fall.
Sometimes circumstances change and a variable mortgage rate will usually provide more flexibility. If you want to get out of a fixed rate early, there will usually be high penalties associated with this.
Here at Planet Mortgages, we’re proud to have the best team of mortgage professionals in the entire galaxy! From guiding first-time buyers in the right direction to remortgaging advice, we can help you land your dream home. Get in touch
with our experienced team today!