Fixed Rate Mortgages: Are They Right For You?
Purchasing a property is, for the majority of people, the biggest single financial obligation of their lives, so it pays to research the market heavily as the scale of the commitment means getting the wrong mortgage is something you simply cannot afford to do.
A mortgage is essentially a loan to aid you in buying the house of your choice and is usually paid back over a relatively long period of time, commonly twenty five years. It is secured against the property, meaning the lender has the right to repossess the house if you fail to make the scheduled repayments.
There are many types of mortgages available and their suitability depends largely on both your personal and financial circumstances and the type of life you want to lead once you have your mortgage.
There is no shortage of information out there, not to mention competition between mortgage providers, so you have ample opportunities to gather information before deciding on the option that is best for you.
Fixed-rate mortgages allow you to fix the rate of interest you pay on your loan for a set period of time, usually between two and five years, although longer term fixes are available. Your repayments cannot increase during the fixed-rate period, enabling you to have certain knowledge of your monthly commitment and plan your finances around it.
A fixed-rate mortgage protects you against any rise in interest rates during your fixed term, meaning you can save money if interest rates are rising. Conversely, if the interest rate falls you can end up paying more than borrowers on variable rate deals. Most mortgage providers apply early redemption charges to a fixed-rate deal, meaning a charge is incurred should you choose to move your mortgage during that time.
The attractions of fixed rate mortgages are that they make it easier for you to plan your monthly expenses, as your mortgage payments will remain constant during the fixed-rate term. Many prefer knowing exactly where they stand with their personal finances – holidays and car purchase calculations are made easier as you simply deduct this monthly obligation from your earnings.
These mortgages, like any other mortgages, can appear at first to be an enormous, sometimes overwhelming commitment. Over time however, you will find you make your peace with it and despite its strong presence, it will not prevent you living the life you want, rather it becomes a constant companion in that life.
Like anything else, fixed-rate mortgages are best approached with a positive attitude. Millions have them and many more will do so this year. Research, advice, a good solicitor and the ability to listen objectively will determine if they are the right choice for you.
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Jul 18th, 2008
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