Explanation Of Fixed Rate Mortgages And Remortgages
No Change In Payments Due & Costs Fixed For Agreed Time Budget Knowing Exactly What You Will Pay Potential To Fix Again When Deal Ends
One major decision that your adviser will work on establishing is whether you require a fixed rate or a variable rate mortgage. With variable rate mortgages the payments you make each month can be varied by the lender based on the mortgage contract you have with them. This usually means that if they move their own interest rate, known as the lenders Standard Variable Rate or SVR, or another rate they have linked your mortgage rate to such as the Bank of England Base Rate goes up or down, then the rate applied to your mortgage will move the same way and same amount - making your payments higher or lower respectively. Sometimes the changes are applied straight away i.e. as soon as they move their rate your next due payment will change other institutions will calculate the affect over a 12 month period and adjust your payments once a year to keep up with the amount due. Needless to say there is no guarantee as to what can happen to the rates applied to your mortgage with a variable rate mortgage.
Explanation of Fixed Rate Mortgages & Fixed Rate Remortgages
Fixed Rate mortgages are pretty straightforward and basically do as they say. You will be offered a rate by the lender (mortgage provider) through your mortgage adviser (in our case First Choice Finance) that is fixed for a set period of time. This period is almost always in a round number of years and tends to be tabled as 2, 3 or 5 year fixed terms. During the agreed term your payments due on the mortgage will stay exactly the same. It is important to bear in mind that once the agreed fixed term mortgage term has ended the net payment you make will normally revert to the SVR or whatever rate standard is in your mortgage contract.
This is why it is probably a good idea to consider the different options available to you by talking to a mortgage adviser or if you prefer scouring the lender market yourself to find out what products are available to you a good few months before any current fixed mortgage term ends. This will give you time to get the new product in place, even if it is with the same lender, immediately your current mortgage deal ends.
It may seem that choosing a fixed rate is likely to be favoured, however many variable rates are currently lower than fixed rates and some people on variable rates have benefited in recent years from some of the bank rates, in particular the Bank of England Base Rate, being so very low. Also there are some hybrid products around in the fixed mortgage area known as capped mortgages. These are interesting adaptions to fixed rate mortgages and remortgages as the rate applied to your mortgage has a cap, which is a specific rate that it cannot go above. The idea being that in this case if interest rates are increased your payments can only go up to the rate at which your agreement is capped but if rates by the lender are reduced below your capped rate you will see that reduction on each occasion it occurs.
Clearly the direction to go, fixed, variable or capped on your mortgage or remortgage is not straight forward and this is why you may well want to make the choice to speak to a qualified mortgage adviser, who will find out which of these rate types they believe is suitable for your circumstances and recommend a mortgage product to you based on your needs and requirements. To take the advice route and to receive a no obligation free quotation please call on any of our numbers or fill in our short online enquiry form at the top right of this page.
Mortgages & Remortgages
Borrow £80,000 over 25 years
At 4.6% Variable, £461.95 for
300 months. Total Payable
£138,585. Total Cost Of
Credit £58,585 (incl £1360 fee)
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Established In 1988. Company Registration Number 2316399. Authorised & Regulated By The Financial Conduct Authority (FCA). Firm Reference Number 302981. Mortgages & Homeowner Secured Loans Are Secured On Your Home
First Choice Finance is a trading style of First Choice Funding Limited of The Old Courtyard, 103 Buxton Road, High Lane, Stockport, Cheshire. SK6 8DX. Copyright protected 2014-2018.