Fixed rate mortgages the pros and cons

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As a consumer you will find that there are a lot of different types of mortgages available to you, and as such it can be very difficult for you to choose the right one that best suits you. However when you do not quite know what lies round the corner one solution can stand out from the rest and that is a fixed rate mortgage. On fixed rate mortgages you will find that the rate that you pay is secured for a set period of time. There can be benefits to this and there can be disadvantages this article deals with some of them.

It has to be said fixed rate mortgages are one of the most popular types of mortgage loans. Typically, the mortgage is for 15 to 30 years. There can be shorter terms as well as longer terms. Longer terms, such as 40 years and 50 years are great for areas where the housing market is extremely high.

A great up side to a fixed rate mortgage is the fact that the rate itself will stay the same and as such so will your mortgage payment. Because of this it does make budgeting on a monthly basis exceedingly easy for most people as they know exactly were they are with their payments each month.

The various fixed rates and their duration is set by thee lenders and of course market conditions. The longer the fixed rate is for the higher the rate will be and conversely the shorter the fixed rate the lower the rate generally is. As a result thorough research is always very much advised to ensure you get the best deal available to you.

Another really good upside to a fixed rate loan is if you are aware rates are set to rise and stay quite high. If you get a fixed rate before they do and rates then subsequently go up you will stay at your chosen lower rate and therefore save quite a bit of money and as such over time if rates stay high you can save quite a lot.

That said the flip side to this coin is also the case. If you get a fixed rate mortgage and rates end up falling you will be stuck with your higher rate and again over time this difference can cost you money. So you should note that having a good understanding of the market is vital if you do not want your mortgage costing you more than it needs to.

As it has been said the interest rates on fixed rate mortgages do vary from lender to lender. Generally speaking, if you are obtaining a fixed rate mortgage for say 3 years plus, you can expect to pay a slightly higher rate than the standard variable rate. It should also be noted that as the lender normally gets money for fixed rate mortgages from the money market there will be a fee for arranging the mortgage. The better the fixed rate invariably means the higher the initial fee will be.

A final bad point is what is known as early redemption penalties or ERPs. An ERP is a penalty charged to you if you redeem, that is, pay off the mortgage early or before the fixed rate is over. It is important to factor this into any decision to purchase a fixed rate because if you have plans for the future you do not want them impacting on any fixed rate you might arrange now. So be sure to decide exactly how long you want the rate for and be prepared to stick to it because failure to stick to it could cost you many thousands.

In summary it can be hard choosing the right mortgage at the best of times factor in complex rates like fixed rates and the job just gets that little bit harder. Never has there been a better time to seek independent mortgage advice just to ensure that you are not unnecessarily spending money you don’t need to, but knowing the good and bad points of fixed rates should make it a bit easier.

To find the right mortgage on a fixed rate for you try Mortgage Route no obligation independent mortgage advice online.

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Topics: Mortgages | Comments Off

Tags: fixed rate mortgages, fixed rates, inter, mortgage, mortgage advice, mortgage advisers, mortgage advisors, Mortgage calculators, Mortgages, repayment mortgages

Article Citation
MLA Style Citation:
Clare, Chris "Fixed rate mortgages the pros and cons." Fixed rate mortgages the pros and cons. 31 Dec. 2007. uberarticles.com. 10 Feb 2012 <http://uberarticles.com/finance/mortgages/fixed-rate-mortgages-the-pros-and-cons/>.

APA Style Citation:
Clare, C (2007, December 31). Fixed rate mortgages the pros and cons. Retrieved February 10, 2012, from http://uberarticles.com/finance/mortgages/fixed-rate-mortgages-the-pros-and-cons/

Chicago Style Citation:
Clare, Chris "Fixed rate mortgages the pros and cons" uberarticles.com. http://uberarticles.com/finance/mortgages/fixed-rate-mortgages-the-pros-and-cons/

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