If it’s important for you to know exactly how much the mortgage payment will be when it comes out of your account, then the recommended mortgage would be the fixed rate mortgage. The longer you fix it for, the higher the rate becomes.
If you’re after the cheapest possible Fixed Rate Mortgage then looking into a two year fixed rate mortgage might be the right option for you to look into. The payments will be low however the two years can come and go quickly and so it’ll only be a short period of time until you have to look for a new deal again. The disadvantage of this is that interest rates go up in the meantime and you may be faced with higher payments at the time of renewal.
If the hassle of applying for new mortgages is too much then a five year fixed rate might be better suited and will mean that the payments of your mortgage would be stable for a much longer period. It would go without saying that five year fixed rates are more expensive than shorter-term deals, such as two or three years and you may miss out on the potential reduction in rates if the interest does decrease and you won’t be able to get lower monthly payments.
Whilst two year and five year fixed rates are the most popular, you’re able to fix for longer if you wish to. Some lenders offer terms consisting of seven or ten year fixed rate mortgages. Although these aren’t very popular amongst the majority of the general public in the UK. The reason for this is understandable as much can change in a decade and you don’t want to sign up to a deal that you can’t get out of.
If your circumstances change then extra charges could be incurred if you repay your mortgage early, most commonly known as Early Repayment Charge (ERC) The ERC is often calculated as a percentage of what you owe. For example, if you choose to pay a £100,000 mortgage early and the early repayment charge is 2%, then you would incur a £2,000 penalty for breaking the contract.
One of the most common mistakes is for the customer trying to ‘beat the system’ or predicting upcoming interest rates. When choosing the best option for your Fixed Rate Mortgage focus on the one that fits in with your own personal situation. For example, do you see yourself moving house again in the near future? Or looking to pay a lump sum off the mortgage? Are hoping to carry out home improvements?
If you’re having trouble figuring out what’s best for your scenario, then our Mortgage Advisors in Manchester will be happy to help guide you and find the best option that will allow you to proceed.