Fixed Rate Mortgage

The house buyer today has much to choose from as far as Mortgages are concerned. The real estate market has been booming, and Mortgage providers have had much reason to rejoice. As a result, Mortgage providers have come up with a range of different Mortgage loans to suit the needs of different kinds of property buyers. The Mortgage buyer today is spoilt for choice thanks to the availability of variable and Fixed Rate Mortgage, repayment and interest only Mortgages, self cert Mortgages, bad credit Mortgages, and a number of other types. Let us look specifically at the fixed rate Mortgage.

What Is a Fixed Rate Mortgage?

A fixed rate Mortgage is one where the rate of interest is fixed. What this generally means is that the rate of interest is not subject to change throughout the period of the loan. However, permutations and combinations are possible. A borrower can opt for a Mortgage where the rate of interest is fixed for only a part of the duration of the Mortgage. One can choose a Mortgage deal where the Rate of Interest remains Fixed for a period of 2, 3, or 5 years. Of course, one can negotiate to get a fixed rate Mortgage deal that is tailored to one's specific needs.

Advantages of a Fixed Rate Mortgage:

• One reason why the majority of property buyers choose to go in for a fixed rate Mortgage is because this kind of a Mortgage provides a sense of definiteness. Given that the Mortgage rate is fixed, it becomes easier to calculate the amount of interest that one has to pay. Budgeting is an easier task when one goes in for a fixed rate Mortgage.
• The fact that the Fixed Rate of interest provides a sense of security to the borrower. The borrower of a fixed rate Mortgage will not be affected by fluctuations in market interest rates. Thus, even if the interest rates rise, Fixed Rate Mortgage will remain unaffected.

Disadvantages of a Fixed Rate Mortgage:

• Just as the rate of a fixed rate Mortgage will not increase when interest rates increase in the market, so too, it will not fall when the interest rates drop. At times when the markets are experiencing a drop in interest rates, the holder of a fixed rate Mortgage will have to continue to pay high interest on their loans.
• Borrowers seeking to repay the Mortgage before the fixed term is over may have to cough up a significant amount by way of early repayment charges.
• Fixed Rate Mortgage usually require borrowers to pay an additional charge in the form of arrangement fees.

Making the Most of a Fixed Rate Mortgage:

As with everything else, pros and cons exist in the case of Fixed Rate Mortgage. It all depends on how a borrower deals with repaying the monthly instalments. If one is able to repay the monthly instalments regularly without defaulting, the fixed rate Mortgage can be a good option.