If you have decided to get a fixed rate mortgage then you may wonder which rate you should go for. Lenders will vary and you might be tempted just to go for the cheapest one. Although this might seem to make financial sense, it is worth thinking about other factors as well.
Is a fixed rate right for me?
It is worth thinking about whether a fixed rate is right for you. Although the security of knowing that the amount that you are paying will not change can be great and knowing that you will be able to afford the repayments is also good, there are disadvantages too. If the base rate falls, for example, you will not be able to take advantage of the fall. It means that you could end up paying more than necessary for your mortgage. It is a risk having a fixed rate. If you feel that you will only just manage the repayments then having a fixed rate will give the security of knowing that you will be able to manage. The fixed rate term will last a few years, perhaps up to five and then you will move onto the variable rate. You may then be able to move to a more competitive lender for a while but you may be tied in.
Am I tied in?
A fixed rate mortgage will often tie you in. This means that for the period of the fixed rate, which could be around five years, you will have to stay with that lender and sometimes beyond the fixed rate period. This means that if there are more competitive rates elsewhere, you will not be able to take advantage of them. It also means that if rates fall you could be stuck paying a high rate when others are taking advantage of a lower one. It is therefore worth checking if you are tied in and how long for. It is worth noting that often you can get out of a contract by paying a fee and you could look to see whether you think that is reasonable or not. It could be a few hundred pounds, which you might quickly save if you switch to a cheaper lender but it is more likely to be thousands, which will probably make it worth staying with them. If you are happy to be tied in for a while, then you will need to think about how long you are prepared to do this for. The time will vary between lenders and so you may be happy to only be tied in for a few years so that you have the option to move lenders after that if you wish.
Are there other costs?
It is also worth looking to see what other costs there might be. There will be fees if you do not make your repayments on time and things like this and it is worth finding out how much these will be. These can vary a lot between lenders and they can be significant but many potential borrowers will not look at them. They will be in the terms and conditions, but this could be tricky to read through so it can be better to get in touch with the lender and ask them.
What is the lender like?
It may be important to check out what the lender is actually like. It might be that you have queries or you are looking for flexibility or good customer service. This service that you get will vary between lenders and so it is good to compare them. You may want to read reviews of them to find out more or ask friends and family.
Once you have checked out all of these things, then you will be in better position to choose your lender and therefore your rate. You may find that the one with the lowest rate is not one that you want to go with and so you are prepared to pay a bit more in order to get peace of mind. However, you may feel that the cheapest is fine and you are not prepared to pay more than necessary. You may even feel that all of the fixed rates are too expensive compared with the variable rate products and that you would rather go with one of those.
Obviously, the decision is a very personal one but without doing the research you will not have enough information to base your decision on. This can take time which is why some people decide to use a financial advisor. They will have a good understanding of the different options as well as the costs and will be able to explain it all to you so that you can make the right decision based on your circumstances.