What fixed rate mortgage term should we get?
7:15 a.m. March 10, 2022
My partner and I are looking to buy our first home this year, but are worried about rising interest rates. I read that we could take out a long term fixed rate mortgage which would keep our repayments at a fixed level for up to 40 years. Should we go there?
Diana fish of Blacksmith and pinch respond :
First, I cannot give you direct advice without knowing all of your circumstances. I can only share a few thoughts here that might help you understand the factors to consider.
The vast majority of fixed rate mortgages will give you a fixed rate for a relatively short period – usually up to five years. However, an increasing number of mortgages with longer possible fixed rates are becoming available. Ten-year fixed rates are becoming widely available and a few lenders are coming to market with full-term fixed rates, some of which are offering 40-year terms. This normally requires you to reach the end of the term before a minimum age set by the provider (usually 70).
However, using a long-term fixed rate may not be in your best interest. The rate you can get today for a long-term transaction will almost certainly be higher than for a shorter fixed-rate period, and while higher rates seem likely in the next few years, they could come back down at some point. given in the future. . A higher rate may also impact how much you can borrow through the provider’s affordability verification processes.
Another potential problem can arise if you want to borrow more to move or make improvements to your home during the term of the mortgage. You may find that additional borrowing could be more expensive. Remortgaging later if your property appreciates could also become more complex, with potential prepayment charges to consider.
It would be a good idea at this stage for you to sit down with an independent mortgage adviser and review all the options so that you can find the best route for both of you.
Your home can be repossessed if you don’t keep paying your mortgage. There will be a charge for mortgage advice. The exact amount will depend on your situation and the type of loan taken out. Smith & Pinching’s minimum advisory fee is £700. The opinions expressed in this article do not constitute advice.
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