The benefit of fixing your mortgage is that it gives you stability of monthly mortgage costs by protecting you against interest rate rises. The longer you fix for the more certainty that you have. Most mortgages are fixed for 2 to 5 years but you can fix for much longer. So firstly ask yourself, do you want certainty of your monthly mortgage costs? How long do you want this certainty for?
What are the disadvantages?
The disadvantage of fixing is that it usually ties you into the product, so a 5 year fixed rate mortgage will tie you in for 5 years. You can always get out of it but you will be charged for this. So if you fix for 5 years and then sell your property after just 2 years you will pay an early repayment fee. So ask yourself, do you have any plans to move or sell your property within this time scale? Are you likely to start a family? Are any life events likely to happen such as marriage or even divorce? Is it likely that you may need to relocate due to career progression? Is your income likely to change for better or worse during this time?
What if i move home during my fixed rate?
Most mortgage products are portable. This means that if you move to a new property that you can take the mortgage with you. This avoids paying a early repayment charge. The new property does need to meet the criteria and they will also carry out affordability assessments, even if your mortgage amount is remaining the same. So sometimes even a portable mortgage can not be moved and you can still end up paying a fee. If you are planning to move it may be best to fix for a shorter term.
What about costs?
Another important point to consider is value for money. If your mortgage is a fee based product and has a lender fee attached to it then a longer term fixed product may be cheaper in the long run. A 2 year fixed with a £999 lender fee is providing less value for money than a 5 year fixed with the same £999 fee. Over the life of your mortgage if you can reduce your fees to every 5 years it makes a big difference.
Can I get a fixed rate with no tie in and no early repayment charges?
It may be possible to get a fully flexible fixed rate product- this means that you get a fixed rate but you are not tied into the mortgage and can repay at anytime. Ask your mortgage broker about this.
Does fixing for 5 years help me get a bigger mortgage?
Some lenders will increase the loan amount available if you take out a 5 year product, this is because fixing for 5 years provides the lender with more certainty that you can afford the mortgage. So in some instances it may be that a 5 year fixed is your only option.
Summary:
A short term fixed gives you more flexibility by only committing for 2 years at a time , a longer term fixed gives you more certainty and protection against rate rises but it is a longer term commitment and if your situation changes during this time you may end up paying an early repayment charge to get out of your mortgage.
Getting advice:
It is important to get your mortgage right from the very beginning, so that your home ownership journey is successful. Our broker advice team will be able to help you with this and will be able to advise the best product for you.
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