Fixed Rate Mortgage
This guide offers a guide to Fixed Rate Mortgages.
A fixed rate mortgage is where a mortgage company offers to fix the interest rate of the mortgage / loan for a fixed period of the full term of the mortgage. Typically the rate is usually fixed for a period of 1 - 5 years, although the period can be longer.
Once the fixed rate period expires, the interest rate payable normally reverts to a Variable Interest Rate.
Benefits of a Fixed Rate Mortgage
A fixed rate mortgage allows you to budget for your monthly mortgage repayment as you'll know exactly how much you will pay each month for the duration of the fixed period, regardless of a change in interest rates.
Disadvantages of a Fixed Rate Mortgage
If interest rates do fall, you will be making a higher repayment that you would if you have a Variable Rate Mortgage, of course the flip side of the coin is that if interest rates rise.........as mentioned above.
If you wish to terminate your mortgage for any reason before the end of the fixed rate period, the early redemption penalty is usually higher than if you were on a variable rate mortgage.