For anyone wanting a mortgage nowadays finding the wood for the trees can be more than a daunting process with so many mortgage companies offering so many mortgage products. Factor in the fact that you just cannot tell the future make the whole job that little bit harder. It is for this reason that fixed rate mortgages exist. When you have a fixed rate mortgage you know just what you are going to be paying for a given period of time. There can be good points and some bad points to this type of mortgage loan within this page we will try to deal with some of them.
Fixed rate mortgage can be considered one of the most popular of all the mortgages available. Most mortgages are arranged over a 25 year period. That said you can have mortgage terms shorter or even longer than that. It is not unheard of to have a mortgage over a 40 year term especially if you want to keep the mortgage payment low.
A great up side to a fixed rate mortgage is the fact that the rate itself will stay the same and as such so will your mortgage payment. Because of this it does make budgeting on a monthly basis exceedingly easy for most people as they know exactly were they are with their payments each month.
The various fixed rates and their duration is set by thee lenders and of course market conditions. The longer the fixed rate is for the higher the rate will be and conversely the shorter the fixed rate the lower the rate generally is. As a result thorough research is always very much advised to ensure you get the best deal available to you.
One other great good point to a fixed rate is if you are savvy to were rates are going to be in the future you are able to bet against the market. If you know rates are on the up and you secure a low fixed rate you will be saving money and over a long period of high rates this amount could be hundreds or even thousands.
On the other side, if you lock in a fixed rate and then interest rates fall, you are stuck paying the higher interest rate. And over time, this could cost you a considerable amount of money. Therefore, it is important that you have a clear understanding of the interest rates' predicted future and what exactly you need from your mortgage over that period of time.
Regardless of the fact that fixed rates do vary from Mortgage Company to Mortgage Company it is considered a rule that three years or less the rate you will pay will usually be less than the lenders standard variable rate and over three years you should expect a bit more than the lenders standard variable rate. It is also a common fact that due to the fact that most mortgage companies borrow fixed rate money from the money markets they in turn charge an arrangement fee to you the borrower. As a consequence of this you will find that the more competitive the mortgage rate the higher the fee being charged.
You should also be aware of another pitfall to fixed rate and that is the redemption penalties these are penalty fees that lenders charge if you redeem the loan before the end of the fixed rate. Most lenders charge this fee up to the end of the fixed rate period ends but you should check to see that the fee is not charged beyond with your particular deal. Because of these fees you should always be wary of the length of time you choose to take a fixed rate for as this can have an impact on things you choose to do in the future like refinancing or moving home.
From an initial view it is always hard to see which mortgage would suit you best. That said with a little bit of work you can find the right deal for your personal circumstances. Fixed rate mortgages do have ups and downs so when you make the decision make sue you consider them first and get some mortgage advice from a mortgage broker.