Fixed Rate Mortgages
The fixed rate mortgage product will always give a fixed amount of repayment every month no matter what happens, the monetary law of England and the entire United Kingdom fraternity provides for this, so when a customer opt for this method to purchase a property he will have certain advantages, the monthly repayments are set for a certain period of time, the repayment duration can vary depending on several factors as per the agreement, but it can be anything from two years, five years or even more, even if there are changes by the Bank of England in rates, the rates remains the same till the full repayment period is recovered.
Once a fixed mortgage contract has been signed between the borrower and the lender, it will have to run its full course to the agreed time, once the duration has expired the lender rate automatically reverts to the Banks market rate, but should the borrower wish to change the terms to shorten the duration, there is a penalty of extra amount he will pay because of changing the terms, so you must scrutinize well the terms and duration of your fixed term mortgage to be prepared to serve it appropriately, by doing this the borrower will avoid any unnecessary penalties if terms are changed, but the borrower is more advantaged since the rate is fixed.
A repayment mortgage facility is very common in the UK region, many borrowers find it very convenient since it’s much easier to budget about it on a monthly basis, the type of mortgage is known by other terms as capital repayment mortgage, the monthly fixed amount made by the borrower from their account (or basic bank accounts if they have bad credit) contributes directly towards the final amount plus the interest, the fixed rate of the interest will make the repayment amount also to be fixed, it becomes easier to determine how much to pay on a monthly basis without any alteration whatsoever.
What is better Repayment Mortgage:
The longer period of mortgage often eats into a borrowers pocket so much, this happens owing to the longer period of repayment which weighs down in terms of interest payable over the period, a shorter period of fixed mortgage will do since the repayment and total amount will be lesser than the former, but there is a catch here due to personal circumstances of the borrower, the borrower should be able to make repayments without strain on the budget, the shorter mortgage period is very suitable to a person who can afford the slightly higher monthly repayment, this kind of repayment mortgage will not tie the borrower down for too long.
Advantages of a fixed mortgage:
Making the required monthly repayment amount on a consistent basis will give a guarantee of finishing it, this can be seen when the full term of fixed mortgage ends, it wattles down the investment risk of which its performance is pegged on to the stock market, the fixed mortgage terms are more flexible and straight forward without any other added factors, your property value will ever go up as time goes by, when this happens you are able tom get even a better deal when you remortgage, sometimes borrowers remortgage when they move homes for ,one reason or the other, the equity value will shield the borrower’s credit worthiness.
One aspect of the fixed mortgage is that the borrower is not likely to benefit on stock market if it soars above the mortgage term, this makes it challenging in case of early mortgage repayment which is inhibited by the terms, getting a lump sum amount after the full term is also not possible. Movement to another home in earlier years of the fixed mortgage will still give the borrower same terms.
But when all is said and done, – fixed Rate Mortgages has more pros than cons making it a very convenient credit product, it makes it possible even for low income earners to acquire a property.