When it comes to mortgages, there’s no one-size-fits-all solution. Various considerations must be considered when deciding between fixed and variable mortgage rates. In a higher mortgage rate environment like the current one, first-timers or people coming to the end of their mortgage terms may find it quite challenging.
Choosing the right mortgage type can be complicated if you are a first-time borrower. While you need the assistance of a mortgage advisor in Stamford, knowing which mortgage type is best for you is also crucial. For this, you need to understand the key features of both mortgage types and understand which can help you save more money.
Read on and determine which is ideal for you based on your circumstances.
What is a Fixed Rate Mortgage?
A fixed-rate mortgage is a mortgage whose interest rate stays constant for a specific period. This period is usually between two and five years, even though longer loan terms are available. During this period, the monthly repayment amount stays the same even if there are changes in the base rate.
What is a Variable-Rate Mortgage?
The interest rate on a variable-rate mortgage is not fixed. It changes according to changes in economic or financial market conditions. The interest rate on a variable-rate mortgage can either go up or down during the loan tenure, leading to changes in the monthly mortgage repayment amounts.
There are three main types of variable-rate mortgages:
- Tracker rate mortgages
- Discount rate mortgages
- Standard variable rate (SVR) mortgages.
Which Mortgage Type Should You Choose?
Choosing the right type of mortgage will depend on your personal requirements, preferences, and circumstances. Both fixed-rate and variable-rate mortgages have pros and cons.
Fixed-rate mortgages help you set a specific budget for your mortgage repayments. This enables you to set that sum aside money and ensures that you do not overstretch your financial limitations.
Variable-rate mortgages are riskier and more suitable for people with more expendable income. With this mortgage type, it is possible to save more money if mortgage rates fall and stay low for a certain period. However, they may also rise, and you must be prepared to bear the extra cost.
Last but not least, it is essential to consult with an experienced mortgage advisor in Stamford to make the right decision. Your income, risk appetite, and ability to react to mortgage repayment fluctuations will determine your best choice. For personalised advice and the best options, contact David List Mortgage Consultants Ltd.