The mortgage market is subject to wider economic influences, so for those looking for consistency, taking out a fixed rate mortgage may offer you peace of mind.
Read on to find out the pros and cons of taking on a 10-year fixed rate mortgage.
A fixed rate mortgage is where your lender agrees to offer you a mortgage where the payments are agreed to a set amount, per month, for a period of 10 years.
Each mortgage type is made up of two parts, capital and interest. ‘Interest’ covers the lender’s cost for loaning you the money to buy a property, and the ‘capital’ refers to the actual funds used to make the purchase. Lenders will also have what is known as a standard variable rate of interest (which changes with the Bank of England base rate). However, for those on a fixed rate deal, your payments will be unaffected by these fluctuations, meaning that your mortgage interest rates will always be the same.
When taking out a mortgage of this type, you need to ensure that it is affordable for you, every month, (especially if you choose to fix for a long period, such as ten years).
When signing up for a mortgage, you are agreeing to pay off the full amount in capital and interest, by the end of the mortgage term (which could be from 20-30 years).
The ‘fixed’ period refers to the length of time of which you will pay the same amount, month to month. At the end of your 10-year period, your rate of interest may be switched to the provider’s standard variable rate, which may be higher than what you have become used to paying every month.
Exiting the fixed rate period may incur early repayment charges. See more about the costs of taking out a mortgage in our Guide to Applying for your First Mortgage.
At the end of the 10-year period, however, you may decide to remortgage with a different lender. Applying for a new mortgage may also incur charges.
Doreen is looking at 10-year fixed rate mortgages, as she wishes to stay in the same property for a long time. She needs to borrow £100,000 to buy her dream house in the countryside and has spotted a deal with 2.39% interest. To secure this deal, however, she will need at least a 50% deposit. Doreen anticipates that interest rates on variable mortgages may rise soon, in fact, she is looking to take out a mortgage when interest rates are at a historic low. She believes that fixing for a long period would suit her circumstances best.
If you are thinking about getting a fixed rate mortgage, get in touch with an independent mortgage broker. They can help you find the best deal for you with free, no-obligation quotes. Apply now.
My biggest concern was finding a mortgage with no strings attached. My options were clearly explained to me and I felt confident about the decision. Alice Silverman, Stoke-on-Trent
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THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
IF YOU ARE THINKING OF CONSOLIDATION EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.
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