Home Mortgage

Fixed interest mortgages seem like a good idea if one is anxiously trying to work out whether a mortgage is affordable within a limited budget. However, the security of knowing what one will have to pay every month sometimes mean that one may actually end up paying more than the going rate, and in a market where rises are anticipated it is certain that the initial rate will be high. The lenders who offer fixed rate deals will calculate very carefully to make, as certain as they can that they do not offer deals which are too favorable to the borrower, thus reducing their profits. So there will be a built in safety net for the lenders and if rates are predicted to go up in the future, you will start at least by paying over the odds for the mortgage.

So, depending on the borrower’s appetite for risk, they may be more inclined to opt for a variable rate mortgage offering an attractive initial rate but with no guarantee as to the future if rates generally go sky high.

It is important in either case to look at the future of the best mortgage, years down the line. Fixed rates are often offered for only a limited period. What is the deal after that period ends? Make sure you understand how your subsequent payments will be calculated. In the case of a variable rate, make sure that there is an explanation of how the variation in the rates will be worked out, and how you will be notified of any changes. Also check for any early redemption penalties.