Fixed rate mortgages
Fixed-rate mortgages are among the most popular on the market. If you're on a tight budget, they're often the ones to choose.
A fixed mortgage has a fixed interest rate for a set amount of time, (for example two, three or five year mortgages). This means your mortgage payments will be exactly the same each month, until the deal expires.
The fixed rate mortgage option is an excellent choice if your budget is tight and you need to know exactly how much you will be spending each month for this reason it is very popular amongst first time buyers. Knowing there can be no nasty surprises can also help you sleep more soundly at night. It can also be worth choosing a fixed rate mortgage in times of interest rate volatility: if you believe rates will rise in the near future, fixing your mortgage rate could save you money. Of course, this works the other way round too you could end up paying far more than your neighbours on your mortgage should mortgage rates suddenly plummet.
As always, you need to check all of the features before signing up for any product.
Length
Firstly, find out how long the fixed rate on your mortgage will last. You'll need to use your own judgement as to how long to go for if it's a particularly cheap deal (say <4.5%) you may wish snap it up and choose five or more years, whereas if you think interest rates may fall in the next few years, you may wish to stick to a shorter, two year fixed rate mortgage deal.
Redemption penalties
Next, find out if there is an associated redemption penalty/tie-in associate with your mortgage. Most mortgage lenders offer a great mortgage rate for a set period during which time, should you leave, or pay off the mortgage you'll be slapped with a redemption penalty. This is usually a percentage of the outstanding mortgage, and can thus equate to thousands of pounds.
However, a number of lenders also employ an extended tie-in. In this case the redemption penalty is payable even after the discounted mortgage deal has ended. And as most lenders switch you to their standard variable rate (typically around 2% higher than base rate) this can result in you paying a lot for your home loan. Unsurprisingly, it's usually best to avoid mortgage deals with extended tie-ins!
Mortgage fees
Mortgage fees have been creeping up at an alarming rate as lenders try to claw back some of the savings homeowners can get by switching mortgage. Check the mortgage fees carefully generally speaking the smaller the mortgage, the more impact the fees will have on what you can save!
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