One of the most talked about debates when it comes to re-mortgaging your home is whether to opt for a fixed rate or variable rate mortgage. Both mortgage types have their advantages and drawbacks. Let us look at fixed rate loans first.
Fixed And Variable Rate Mortgages - Which One Is Best?
One of the most talked about debates when it comes to re-mortgaging your home is whether to opt for a fixed rate or variable rate mortgage. Both mortgage types have their advantages and drawbacks. Let us look at fixed rate loans first.
The main benefit of fixed rate mortgages is that they provide the borrower with security. On a fixed rate loan you know exactly what your repayments will be each month, until your fix period expires. Obviously this can be a huge benefit when planning your financial future in the short to medium term. You can be sure that even if interest rates spiral higher your monthly mortgage repayments will not increase, allowing you to budget expenditure more accurately.
On the negative side, mortgage companies will make you pay for this certainty by charging you a higher interest rate than their Standard Variable Rate (SVR). While fixed mortgages protect you from any sustained rise in interest rates another drawback is that they do not allow you to benefit should interest rates fall. If you choose a Variable rate loan your interest rate will roughly follow base interest rates. Therefore should there be a fall in base rates, this will usually reduce your variable rate (depending on your lender). As a result the monthly repayments you make will fall. Conversely should base rates rise, unlike with a fixed rate loan your repayments will rise.
To sum up there is no clear answer as to which product is best. Much will depend on the type of risk you want to take with regard to future interest rates and the direction in which you think they will move. However, as with all financial decisions, you should do a lot of research and if unsure seek independent professional advice.
If you want to find out more information about mortgages be they fixed rate mortgages or variable rate mortgages please visit the authors website.
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http://www.frogfinance.com/mortgages.php
http://www.frogfinance.com/mortgages/fixed_rate_mortgages.php
http://www.frogfinance.com/mortgages/variable_rate_mortgages.php
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