What is a Fixed Rate Mortgage ?
A fixed rate mortgage has a set interest rate for the period of the mortgage loan.
However should you decide to pay up the mortgage before the end of the period, you may be liable to pay a penalty in interest.
Benefits of a Fixed Rate Mortgage.
If you earn a steady income, a fixed rate mortgage is a highly beneficial type of loan as it can be taken as a constant expenditure when working out a budget.
Additionally when interest rates rise as they often do, you are exempt from any increase in the loan amount as you will continue to pay an installment based on the initially agreed upon interest rate.
Negative Aspects of a Fixed Rate Mortgage.
Unfortunately, when interest rates change for the better, you will not be able to take advantage of the lower interest rate.
Should you redeem your mortgage before the end of the mortgage period, you may be liable to pay a redemption charge (a portion of the interest that what would have been paid if you redeemed the loan within the agreed time period).
Criteria when Applying for a Fixed Rate Mortgage.
A good credit history is needed. The lender requires that you have a stable monthly income for a period usually exceeding 12 months.
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