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Fixed Rate Mortgages

Fixed rate mortgages and remortgages

Whichever type of mortgage is selected, the lender will charge interest and there will be an overall cost to the borrower. The cost of borrowing will vary depending upon the requirements of the lender; for example, there may be a setting up fee, administrative fee, reservation fee and usually there will be valuation and legal fees to be met. A more attractive interest rate could be available for a larger deposit Mortgages with fixed rates of interest tend to have larger "up front" fees than other mortgages.

Fixed rates generally are offered for a fixed term. At the expiry of that term they usually will revert to a variable rate decided by the lender. They have the advantage of offering effective rate reductions when general rates rise, and also the ability to plan budgets because of the fixed cost. They are suitable for borrowers who believe that interest rates will rise and those who want to budget for known costs. The obvious disadvantage would arise if market rates fell below the fixed rate. There could also be a problem when reverting to market rate if it was significantly higher. Normally these mortgages involve an administration fee paid with the application. In addition, a redemption penalty is charged if the loan is repaid within the original fixed term. In some  circumstances this penalty period can run on after the fixed rate period though such 'tie-ins' are becoming less common - e.g. a 2 year fixed rate product  can have a 'tie-in' period that extends to a further 2 years after the end of the fixed rate term i.e. 4 years in all.

This may all seem very complex but don't worry use a mortgage broker with experience can be invaluable in helping you to navigate through the different lenders and deals. A good mortgage advisor knows all the processes involved and can help you through each step.

Other type of mortgages you can consider are Capped Rate, Cashback, Offset, Tracker and Discounted Mortgages.