Knowing About Fixed Rate Mortgage

A fixed rate mortgage is just as it sounds. You pay a fixed sum for the entirety of the term that your mortgage spans. Unlike a standard variable deal, if the Bank of England raise interest rates, you won’t find yourself having to pay a bumper price.

Of course, by the same token, if interest rates were to fall, your fixed rate mortgage could lose its edge as you’d still be paying what you agreed to in a different financial climate. The main benefit of taking this option rests in the security that it brings.

By going fixed rate, you can plan your budget safe in the knowledge that the Bank of England doesn’t hold a trump card over the value of your mortgage - or the interest that you’ll be paying on it, at the very least.

There are two main options for fixed rate mortgages; a 15 year term, and a longer 30 year deal.

In years gone by, nearly everybody opted for the 30 year fixed rate mortgage. Your parents and grandparents are most likely included in that bracket. It was seen as striking the best balance between a commitment that wasn’t going to empty the pockets every month, and wasn’t going to be lingering through retirement either.

There is also a fixed rate 15 year mortgage. This provides a nice alternative if you can afford to pay through the nose for your property on a monthly basis. You’re probably wondering why anybody would wish to drain their pockets when there’s a 30 year option laying in wait, but this particular mortgage draws credibility from the fact that you pay MUCH less interest.

Over the extra fifteen years of the longer term deal, you’ll have paid a significantly larger sum of interest. In that sense, it’s cheaper to take the 15 year fixed rate mortgage. But you must be able to afford the payments in the first place.

More recently, we’ve seen various mortgage brokers cropping up with weird and wonderful alternatives to these standard packages. If you look far enough, you’ll find 20 year, 40 year and even a 50 year mortgage on the market.

While the advantages of spreading payments over 50 years are obvious, you have to ask yourself whether it’s enough to erase the stress that comes with being tied down to the dotted line for so long. To put that in perspective, you could splash out on your fixed rate mortgage at the grand old age of 20...and still be paying it in to your 70s.

In general, fixed rate mortgages are seen as the safer alternative to a variable rate. While it’s true that you could ultimately end up paying more than you should have, the opposite applies and you could also end up paying less. The key thing is that you KNOW how much you’ll be paying for the term of the deal. You’re not chained by the neck to the decisions of the Bank of England. And when we discuss something as significant as a mortgage, many people opt for the security of a deal where they know exactly where they stand.