Your mortgage is most likely the biggest financial commitment you’ll ever make and probably the biggest monthly expense you have. Especially now during these difficult economic, whatever you can do to regulate your outgoings so you know exactly what to expect each month, will help you feel a sense of stability. So, when it comes down to deciding between a fixed or a variable rate when you’re selecting a mortgage, if you’re hoping for stability, choose a fixed rate.
This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice.
Fixed-rate mortgage
A fixed-rate mortgage locks your rate in for a specific amount of time. It remains unchanged during the term period and therefore your monthly mortgage repayments will also remain unchanged. Because of this, it’s easier to create and stick to a budget — you don’t have to worry that one month you might suddenly have to pay hundreds of pounds more than you have been. It’s an easy way to stay on top of your finances.
At the end of your term, you have two choices. The first is that you can do nothing and the second is that you can remortgage to a new deal. If you opt to do nothing, then your mortgage provider will switch you over to an SVR which is usually higher than a fixed rate. This is not great for your bank account because a higher interest rate means a higher payment.
If you want to save money compared to an SVR, then you should consider remortgaging. Before your rate period is about to end, usually about 14 to 16 weeks, evaluate your current deal and find out what your new payments will be if you don’t switch. Then shop around to other lenders to see what their current rates are and determine whether or not you can save money by seeking a new deal.
Financial stability
If financial stability is important to you then a fixed-rate mortgage could be right for you.
The major benefits of a fixed-rate mortgage include:
- Your payment is set each month during the entire term of your deal so you know exactly how much you’ll pay, making budgeting easy
- Even with fluctuations in the market or if interest rates rise, your payment stays the same — a positive during times of high interest rates, but if market rates drop, you won’t benefit from lower repayments
- You can choose the length of time on your deal —short or long fixed terms deals are available
Imagine the possibilities
If you like your current lender, it is possible to remortgage with your existing mortgage provider, or you could switch to a new one. Whichever option you choose, you will more than likely have to pay early termination fees if you leave your existing deal early.
The good news is that if you are offered a mortgage, you have between three to six months to accept, which is why if you’re looking for a new deal, you should start with at least three months to go. But the end of your current term could open up a whole new world of possibilities.
If you’re in the market for a mortgage that suits your needs, look no further than Dental & Medical Financial Services. Our expert mortgage advisers are here to help you find a mortgage deal that works for you and we’ll guide you through the mortgage process, so get in touch with us today.