What Are Fixed Rate Mortgages?
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- What is a Fixed Rate Mortgage?
- A loan where the initial payments are based on a certain interest rate for a stated period and the rate payable will not change during that period regardless of changes in the lender's standard variable rate.
- What are Variable Rate Mortgages?
- A variable rate mortgage is when you pay a standard variable rate (SVR) that changes in line with the Bank of England's base rate. The SVR is usually between 2% and 4% higher than the Bank of England's base rate, but this will vary from lender to lender.
- What Are Flexible Mortgages?
- Generally, people rebroke their mortgage deal once every five or six years. They also may change their mortgage lender at the end of a discounted or fixed period. Chances are in that in the time between their last remortgage, the mortgage market will have changed a great deal.
- What is Adverse Credit?
- If a borrower has a history of poor credit usage then this is described as Adverse Credit, Sub Prime or just simply, Bad Credit. Poor Credit history can include County Court Judgements (CCJ's), Bankruptcy, Mortgage arrears or any late payments on credit cards, credit arrangements etc.
- What Happens If I Have Bank Defaults?
- If you have failed to meet payments on a credit agreement such as secured loans, unsecured/personal loans, credit cards, store cards or car finances etc, or you have failed to comply with your lender’s requirements, you will be described as having 'defaulted'.
Fixed rate mortgages set the interest rate on the loan at a level agreed at the outset of the loan. Fixed rate mortgages only have a fixed rate for a set period of years after this time period the interest rate will revert to your lenders standard variable rate.
Fixed rate mortgages can be very advantageous if you are trying to manage your expenditure. You will be fully aware of how much you have to pay each month, and you will be insulated from any rises in the base rate and cannot be caught out with sudden increases in payments. If the interest rate rises above the fixed rate on your mortgage, you will actually be saving money.
However, if the interest rate falls during your fixed rate period, the real cost of your mortgage will actually increase. However, you will still know how much money will be coming out of your account each month, this allows you to more effectively plan your personal finances.
The fixed rate period is typically between six months and five years, traditionally fixed rate periods of between 1 and 3 years have performed best. You may even be able to get a fixed rate for the hole life of the mortgage. NOTE this can be very dangerous, always ensure that interest rates are likely to rise before taking out an fixed rate mortgage.
When considering what period of fixed interest rate would be best for you refer to a qualified mortgage broker. You should also take advantage of the internet and the print media to read up about the Bank of England interest rates so that you can follow your brokers reasoning regarding what is the best fixed rate mortgage for you.
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