With rising living costs putting a strain on many household budgets, the cost of your monthly mortgage payment is becoming increasingly crucial. The faster you pay off your loan on a capital repayment mortgage, the higher your monthly payments will be. A longer term may result in a lower monthly payment, but you will also pay more interest.
Whether you’re getting a new mortgage to buy your first home or have had a mortgage for several years and want to remortgage, you should think about how quickly you want to be “mortgage free.” You should measure this against a mortgage term that allows you to make affordable monthly payments.
It’s not all fixed rates
Fixed rate mortgages provide borrowers with the steadiness of knowing what their mortgage payment will be for a certain length of time, which aids in budgeting. Because of the manner many lenders decide what rates to provide, tracker plans are now priced far more competitively than fixed rate products.
In contrast to a fixed rate mortgage, the monthly payment of a tracker mortgage fluctuates, and the interest rate paid on the mortgage ‘tracks’ the Bank Rate for a defined period of time. While there may be a penalty for leaving your lender, especially during the tracker period, there are tracker products that have no early repayment charge, so you can leave without penalty.
If your fixed-rate loan is coming to an end and you’re faced with a higher interest rate than you expected, moving to a tracker at a lower rate may be appealing. Although tracker products may be less expensive than current fixed rates, you must be confident that you will be able to afford your repayments if the rate rises.
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