Mortgage Rates - Fixed Rate? Capped Rate? What Does It All Mean?

Mortgage Rates - Fixed Rate? Capped Rate? What Does It All Mean?

Author: Marius Bezuidenhout

When shopping for a mortgage, there are a number of different aspects to keep in mind. You can shop online, which is convenient for most people these days, as you don’t have to run around during your lunch break. For others they may be an impersonal experience and they would prefer to speak to consultants face to face. Is this case, take the time out to do all your shopping at once. It is merely a personal preference. Look or ask around for types of mortgages and of course different rates.

Flexible mortgages are specially designed to accommodate your changing working environment or lifestyle. It is designed to give you more control over your finances with varying degrees of flexibility. With a fully flexible mortgage you can vary your payments to suit your circumstances. If you have extra cash, use it to pay off more of your mortgage. When necessary you can take a payment holiday of up to six months. Or keep up the over payments and you could pay off your mortgage years early. With a flexible mortgage you can even borrow back money if you have made over payments. The term ‘flexible fixed mortgage’ might not make much sense, but you can combine your flexible mortgage with a fixed mortgage, which means you can vary your payments and have a fixed rate at the same time. The rate is fixed for an agreed time.

A fixed rate mortgage is exactly as it suggests – the interest rate on your mortgage stays fixed, which makes planning ahead easier. This means you can budget with your mind at rest, because you can plan ahead knowing exactly how much your monthly repayments will be. With a variable rate mortgage your payments may go up and down according to the Bank of England Base Rate, but with a fixed rate mortgage you have the security of knowing the exact amount you will pay each month, despite any change in interest rates. Your fixed mortgage is ‘fixed’ for a number of years and this is predetermined. Once the fixed rate period is over your payments will revert to standard variable rates.

Fixed mortgage rates are therefore a good idea for first time home buyers who need the stability of a set monthly repayment. Before applying for a fixed rate mortgage you should know how much you are able to pay each month. With an online mortgage calculator it is easy to get a rough guide of how much you can borrow and how much you can spend on repayments per month. Remember, if you cannot make your monthly payments, your house will be repossessed, so be sure to choose a mortgage which is affordable and suits your specific needs.

Mortgage Rates - fixed rate? capped rate? what does it all mean?