A mortgage is a long term commitment – usually 25 years or more in standard circumstances. You pay your mortgage every month for the whole of the loan period so it’s worth checking that you are getting the right mortgage for you before you go ahead.
If you want to have someone talk you through the various advantages and disadvantages of the options available, it’s worth engaging a mortgage solicitor in London like Saracens Solicitors. They can explain what your obligations to the mortgage company will be, help you to crunch the figures and give you clarity around the risks.
Fixed rate mortgages guarantee you a standard interest rate for the length of the deal. This means you know what your monthly payments will be during that time. These are normally advertised as ‘five year plans’ or ‘fixed for two years’ or something similar. If interest rates go up, you will be protected from a steep rise. However, the opposite is also true and, if they go down, you won’t see a drop in the amount you are paying. There is often a penalty for leaving these types of mortgages early so ask your mortgage solicitor in London about ramifications before you commit.
Variable rate mortgages can change according to the terms of your mortgage. The rate is set by your bank and could change at any time. A good mortgage solicitor in London will be able to give you examples of how recent changes in base interest rates would have affected your repayments.
There are a number of different types of variable rate mortgages available that will respond to changes in base interest rates in different ways. For example, sometimes a bank will offer you a discount mortgage to encourage you to buy your property with them. This means that you will benefit from a rate that is below their standard variable rate by a set percentage, for a fixed term. This means that your payments can still fluctuate but will remain lower than a standard variable rate mortgage. You are usually tied into this kind of mortgage and there is a penalty for early exit.