The longer you fix your mortgage, the higher the interest rate will be. If you are searching for the lowest rate achievable, you should look for a short-term fixed-rate mortgage. Downsides to a short-fixed term is that your mortgage will be up for renewal quicker, this meaning when it comes to Remortgaging, your monthly mortgage payments might be a lot more than they were previously.
If searching for a new fixed-rate deal every two years doesn’t appeal to you but would instead not reach the point where interest rates go too high. Then we suggest a medium-term fixed rate might be the best option instead for you and your circumstances.
Most people opt-in for the five-year fixed rates because they add the security regular monthly payments for the foreseeable future. If interest rates drop whilst you’re locked in, the downside to the five-year fixed rate is that if you’re locked in, you will end up paying more than you might have had to if you had instead opted for a shorter period.
The least popular choice is the 7 to 10-year fixed rates on the property market due to the sheer length of the deal. To some people, 7 to 10 years feels like a decade to get set for a mortgage. Fixed mortgage products tend to be the most expensive option for customers.
In terms of interest rates, you need to take into consideration the booking and arrangement fees too. The booking fee can be paid upfront, whereas an arrangement fee is payable on completion. You might know people who have added costs to their mortgage amounts, but this increases the total amount repayable at the end.
Maybe your financial circumstances swiftly change, and you might have to repay your mortgage a lot earlier than you had initially set. Then you could be hit with an ERC (Early Repayment Charge). This fee gets calculated as a percentage of the remaining amount left on the mortgage.
If the remaining mortgage amount you have left to pay is £200,000 and you can pay that off early, with a percentage that is 2%, you would have to pay back £4,000 to cover the broken fixed contract.
Some homeowners consider that they can pay off their fixed mortgage early, without knowing about the Early Repayment Charge. Be aware that you sealed into that deal, and you cannot choose to pay it off early unless you are willing to pay the repayment charge added onto it.
Other people aware of the charge may still choose to consider paying their mortgage off early to get a better deal currently on the market, especially if that deal is only on the market for a limited time.
We would recommend that you avoid chasing after “headline” deals. It would be best if you remembered that the lowest rates come with the highest setup fees. Please Get in Touch today for more fixed-rate Mortgage Advice in Birmingham. If you are still uncertain about them and need more help, our service could be genuinely beneficial to you.