Helping You Make the Best Choice
Choosing the right mortgage is one of the most important decisions you’ll make when buying a home. Deciding between a fixed-rate or variable-rate mortgage can be particularly tricky, and as every buyer is so different there’s no right or wrong option. As an experienced mortgage broker, we’re here to explain each type of mortgage and their distant benefits, helping you to make the best choice.
What is a Fixed-Rate Mortgage?
A fixed-rate mortgage locks in your interest rate for a specific period, usually 2 or 5 years. Your monthly payments will remain consistent throughout that term. Knowing exactly what you’ll pay each month makes budgeting easier, and even if interest rates rise, your payments will remain unaffected.
It’s important to bear in mind that fixed rates are often higher than initial variable rates, and if interest rates fall, you won’t benefit from lower payments.
What is a Variable-Rate Mortgage?
A variable-rate mortgage, on the other hand, has an interest rate that fluctuates in line with the lender’s standard variable rate (SVR) or something external like the Bank of England base rate. If interest rates drop, your monthly payments decrease, saving you money! Most variable deals have fewer early repayment penalties, and initial rates for variable mortgages can be lower than fixed-rate options.
Remember though, that your money could be stretched if interest rates rise significantly, and your repayments rise as a result. This unpredictability can make long-term planning more difficult.
What to Consider
First of all, think about your financial situation. Fixed rates suit those who want to avoid surprises, while variable rates are a great choice for those who have financial flexibility and are seeking reduced upfront costs. You should also consider your long-term plans. Fixed rates are ideal for those planning to stay in their home for the duration of the mortgage term, while variable rates work well if you anticipate moving or remortgaging soon.
It can be hard to predict what will happen with the economy – even professionals have trouble with this sometimes! However, if interest rates are expected to rise, locking in a fixed rate might be a safer option. If rates are stable or falling, a variable mortgage could be more cost-effective.
How We Can Help
Making the right choice can be overwhelming. This is where our advice and support becomes invaluable. We will take a close look at your finances and get to know you so that we have a clear understanding of your goals. This will allow us to recommend the most suitable mortgages for you. We can then liaise with the lender on your behalf, giving you the information you need before ensuring your application is completed without any issues.
Talk to Us
The choice between a fixed and variable mortgage ultimately depends on your personal circumstances – but we’re here to provide you with the guidance you need to make that decision with confidence. So, get in touch with us at A Little Mortgage Advice today!
