The Added Benefits of Selecting a Long-term Mortgage Fix for Your Financial Freedom

For decades, two-year mortgage setups have been quite the norm for homeowners and real-estate investors alike. However, with the rise in interest rates, there has been a gradual preference for lengthier fixes.

Long-term fixes are increasingly becoming popular thanks to the numerous benefits they have, including being more stable in the event of having a financial issue

New Base-rate Increase

Moreover, with the base rate being increased to 0.75% last week, it is highly likely that mortgage rates will follow suit as well. Hence, individuals that have a longer fix will be at a greater position.

That being said, deciding on the length of a fix is a game of risks in itself. One can aim to target a fix with a shorter term, but with the advantage of a lower interest rate. You will also have to accept the possibility that your rates will have increased by the time you remortgage.

Alternatively, you can opt for a longer fix which has a higher rate, but you will have the comfortability of knowing the rates that you will be paying through and through.

That being said, you might end up paying less or more depending on whether your current rates fluctuate during that 10-year period. Hence, it would be wise to carefully consider your options.

So here are the advantages of having a 10-year fix;

Avoid incurring extra fees in mortgage

The problem of switching in between fixes is that your fees can inadvertently add up. For example, if you select five two-year fixes running concurrently within a 10-year window, you’ll likely end up paying five times the fee! However, with a 10-year fix, you’ll incur significantly lower fees, which of course you’ll have to pay only once during that time period.

Avoid unwanted interest rates

It is predicted that base rate rises will be rising soon in the next couple of years, and hence, long-term fixes guarantee stability with your mortgage rates. Hence, even if interests make mortgage rates skyrocket, you can rest assured you’ll be safe during the uncertain climate.

Long-term fixes also provided the added benefit of being increasingly cheaper as compared to taking a series of short-term fixes. In some instances, they can be as much as 5 times cheaper

Your current mortgage setup is safe from housing price fluctuations

One other advantage of long-term fixes is that they can give your house the much needed financial reprieve in case of price fluctuations. This goes especially if the current price of your house falls below the remortgage price, consequently causing the LTV to increase, rendering you unable to get access to the peak mortgage rates.

However, long-term fixes are unable to protect you from price fluctuations in the event that pricing on houses is on a steady incline.

Protection from shifting criteria of lenders

In the event that mortgage providers decide to become more stringent with their affordability structure, remortgaging can be a tedious affair. With long-term fixes, however, you are insulated against such an event.

You only get a single credit check

Whenever you apply for a mortgage, a credit check is performed. Hence, during the months prior to remortgaging, it is wise to not consider any other credit products to prevent your score from being affected.

Hence, if you’re doing short-term fixes, this is something that you’ll constantly have to look into whilst conducting your financial planning. In the event of a longer fix, you don’t have to worry about restricting yourself when it comes to credit.