Advantages and Disadvantages of Fixed Rate Mortgages
Fixed rate mortgages are one of the innumerable varieties of mortgages found in the UK mortgage market. This variety ensures that the rate of interest remains the same throughout the loan term, unlike variable rate and tracker mortgages where the rate depends on the base rate in the market. Some varieties of mortgage loans offer fixed rates only for a specific period of time. Fixed rate mortgages are associated with terms and conditions that are easy to comprehend and are quite straightforward compared to variable rate mortgages, interest-only mortgages, and others.
Top Advantage
If you are planning to take a fixed rate mortgage loan, you can easily calculate your monthly payments and rest assured that this is what you have to pay as long as the term of your fixed rate mortgage lasts. You can also easily calculate how long it will take for you to pay off your principal and the interest accrued on it.
You can rest assured that your mortgage rate will not change according to the base rate fixed by the Bank of England. In fact, the Bank of England can alter the base rate as much as it wishes, but your mortgage rate will remain untouched and you can pay off your mortgage at the same rate agreed upon throughout the loan term.
Fixed Mortgage Types
Two major varieties of fixed-rate mortgages are available in the UK mortgage market — 30-year mortgage and 15-year mortgage. Although fixed mortgages are available for 10-year and 20-year terms, they are rarely used.
Disadvantages of Fixed Rate Mortgages
One of the biggest advantages of fixed rate mortgages is their fixed rates, which do not change irrespective of how many times the Bank of England changes the base rate. However, the biggest advantage of fixed rate mortgages can also be its biggest disadvantage because borrowers can do nothing if the base rate becomes lower and will have to continue paying the higher rates. Moreover, fixed rate mortgages are more expensive than other varieties of mortgage because mortgage lenders want to protect themselves in case the base rate increases.
Finding the Best Rates
Before deciding to take a fixed rate mortgage, you must discuss its pros and cons with a qualified mortgage advisor. Getting a fixed rate mortgage is the ideal financial decision to take if the rates are really low, the monthly payments are affordable, you prefer monthly payments that do not change over time straining your monthly budget, and you plan to live in the house for a long time,
Fixed rate mortgage rates vary from dealer to dealer, and those interested in getting the best deals and the most competitive rates simply need to research as many deals as possible. Fixed rate mortgages usually have higher rates and are associated with a wide range of fees, owing to which you need to discuss the product thoroughly with your mortgage dealer. If you have a good credit score, you can also request the dealer if they can waive off some of the charges involved.